An installment contract Is a legally binding agreement in which one party makes payments to another party in scheduled intervals. These contracts can be set up for many different types of goods and services provided. If the party who is making the payments fails to deliver a payment at an interval, penalties can occur. For example, the selling party often has the right to repossess the good if the payments are not made properly.
The main purpose of installment contracts is to allow buyers more time to pay for the good or service that they are paying for. Sellers will often include installment contracts as a payment option because it can help people afford the good or service that they are offering. Things that are often paid for in installments include houses, automobiles, and loans. When a good or service is very expensive, installment contracts are often offered. This is because many people cannot afford to buy things such as a house with one lump sum.