Loans and Credit Practice Test 2026 – Comprehensive Prep Guide

Installments. When you take an installment loan, you repay with fixed monthly payments that stay the same over the loan term. Each payment reduces both the principal and the interest owed, so over time you’re paying off the loan in full by the end of the term. This is different from revolving credit, where you can borrow up to a limit and balance can carry over with variable payments, and from secured credit, which is about using collateral rather than the payment schedule. So the term that describes these regular, equal payments toward both principal and interest is installments.