Instalment

An agreed payment made by a borrower to a lender, as one amount in a schedule of payments over a period of time.

If the instalments are of equal value they are said to be equated.

Repayment of a loan by equated instalments ensures that the total cash payable by the borrower, comprised of interest plus principal, remains the same for each instalment. Most repayment mortgages are set up in this way.

Equated instalments pay off varying proportions of interest and principal within each instalment, so that by the end of the schedule of instalments, the loan is paid off in full. The proportion of interest is greatest at the start, and least at the end.

An alternative spelling is installment.

See also

• Annuity factor
• Interest
• Loan
• Principal