Glossary: Installment loans

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What is an installment loan?

An installment loan is a structured loan that allows customers to pay for a purchase over time through a series of fixed, scheduled payments, or installments. Installment loans can be an attractive way for customers to pay for a purchase in small manageable amounts. Interest rates can vary according to the repayment timeline, with longer term loans having higher interest rates. Installment loans can be integrated into the merchants’ sales point-of-sale financing process, providing flexibility for customers to spread the cost of their purchases.

Key features:

  • Checkout integration: Merchants can integrate installment loans into their point-of-sale financing process, allowing customers to select this option when making a purchase.
  • Fixed payment structure: Customers receive a clear and predictable payment structure with clear terms.

Benefits for merchants:

  • Increased average transaction value: Offering installment loans can lead to higher average transaction values, as customers may be more inclined to make larger purchases when they can spread the cost.
  • Competitive differentiation: Merchants can differentiate themselves from competitors by providing flexible point-of-sale financing options, attracting customers seeking affordability.
  • Enhanced customer loyalty: The availability of installment loans can foster customer loyalty, encouraging repeat business and positive reviews.
  • Boost in conversion rates: A more flexible point-of-sale financing structure can contribute to increased conversion rates, as customers are more likely to complete transactions when given payment flexibility.

Considerations for merchants:

  • Integration effort: Merchants should assess the effort required to integrate installment loans into their existing point-of-sale financing systems, ensuring a seamless and user-friendly experience.
  • Communication strategies: Clear communication about the availability of installment loans and their benefits can enhance customer awareness and utilization.