A direct-lender installment loan is one where repayment is required in a predetermined number of equal payments, and the borrower and lender deal together directly rather than through a third party, such as a mortgage broker. Mortgages that are not issued through a third party are examples of direct-lender installment loans. There is no middle-man, and equal payments are typically required on a monthly basis for 30 years.
There are many other types of installment loans, such as auto loans, recreation loans and personal loans. Home mortgages and loans for specific purchases, such as buying a car or boat, are secured loans. Secured loans are backed up by the property the loan proceeds are used to purchase, so the purchased property can be repossessed if the borrower defaults.
Personal installment loans are unsecured because they are not tied to any specific piece of property. Since the borrower can spend the loan proceeds any way he or she chooses and has not agreed to forfeit the property if the loan defaults, the lender has no right to repossess what the borrower purchases with the loan proceeds.
Financial experts consider direct-lender installment loans a superior choice over credit cards and title loans for consumers, because they are less expensive and have stable minimum payments. Installment loans are available to borrowers with poor credit or no credit from certain lenders.