7. Installment Loans

The composition of installment loans by domicile and type of borrower at March 31, 2025 and 2026 is as follows:

 

 

Generally, installment loans are made under agreements that require the borrower to provide collateral or guarantors.

 

At March 31, 2026, the contractual maturities of installment loans (except purchased loans) for each of the next five years and thereafter are as follows:

Revenues from installment loans which are included in finance revenues in the consolidated statements of income are ¥205,734 million, ¥188,294 million and ¥211,379 million for fiscal 2024, 2025 and 2026, respectively.

Certain loans, for which the Company and its subsidiaries have the intent and ability to sell to outside parties in the foreseeable future, are considered held for sale and are carried at the lower of cost or market value determined on an individual basis, except loans held for sale for which the fair value option was elected. A subsidiary elected the fair value option on its loans held for sale. The subsidiary enters into forward sale agreements to offset the change in the fair value of loans held for sale, and the election of the fair value option allows the subsidiary to recognize both the change in the fair value of the loans and the change in the fair value of the forward sale agreements due to changes in interest rates in the same accounting period. Loans held for sale are included in installment loans, and the outstanding balances of these loans as of March 31, 2025 and 2026 were ¥111,527 million and ¥105,720 million, respectively. There were ¥97,694 million and ¥78,020 million of loans held for sale as of March 31, 2025 and 2026, respectively, measured at fair value by electing the fair value option.

Purchased loans acquired by the Company and its subsidiaries are generally loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely and characterized by extended period of by the borrower, and it is difficult to reliably estimate the amount, timing, or nature of collections. Because such loans are commonly collateralized by real estate, the Company and its subsidiaries may pursue various approaches to maximizing the return from the collateral, including arrangement of borrower’s negotiated transaction of such collateral before foreclosure, the renovation, refurbishment or the sale of such loans to third parties. Accordingly, although the acquired assets may remain loans in legal form, collections on these loans often do not reflect the normal historical experience of collecting delinquent accounts, and the need to tailor individual collateral-realization strategies often makes it difficult to reliably estimate the amount,

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