An installment debt is a debt where the minimum payment does not change every month. In an installment loan, the borrower receives the complete amount in a lump sum once the loan is closed.
In an installment debt, the principal amount is reduced after every payment that you make each month. A mortgage is a perfect example of installment debt.
Usually, in a fixed mortgage, payments remain constant for the tenure of the loan unless you refinance or your interest rate change for some reason. Some more examples of installment loans would be student loans, auto loans, personal loans, etc.
Unlike installment debt, in revolving debt, the principal amount changed based on your withdrawals. For example, your credit card has a limit of five thousand dollars, and you utilize hundred dollars.
Your principal amount is going to be hundred dollars and you pay your payments and interest according to the amount that you have withdrawn. Let’s say you made $25 on your credit and your balance is $75 and you charge your card in the next month for more than $150.
In the next month’s statement, your principal balance would be $225 and you would be making your payment with interest according to this new amount that you have utilized.