An installment purchase is a purchase which is paid for via a series of installment payments. Installment purchase arrangements are offered by many merchants and service providers in order to facilitate sales to buyers who cannot afford to pay for purchases up front in cash.
Installment purchases are typically settled in full at the time of purchase using a loan provided by a lender. The buyer then repays the loan provided by the lender through a series of loan repayments. Typically, interest is charged on the loan, resulting in a final price higher than the ticket price of the product of service being purchased.
Some merchants and service providers use in-house financing to enable installment shopping. Others make use of financing from third-party lenders. Merchants may offer store cards to facilitate installment purchases.
When goods or services are bought using an installment purchase, the buyer takes possession of the goods and services immediately, but pays for them in installments at later dates. This differentiates installment purchases from layaways, in which a buyer pays for goods or services in full via a series of installments ahead of taking possession of them.