down payment
down payment (n)
English Definitions:
down payment, deposit (noun)
a partial payment made at the time of purchase; the balance to be paid later
down payment (Noun)
A payment representing a fraction of the price of something being purchased, made to secure the right to continue making payments towards that purchase.
down payment (Noun)
By extension, any initial commitment signifying an intention to carry out a larger future commitment, even though no legal rights or obligations are secured.
Down payment
Down payment is a payment used in the context of the purchase of expensive items such as a car and a house, whereby the payment is the initial upfront portion of the total amount due and it is usually given in cash at the time of finalizing the transaction. A loan or the amount in cash is then required to make the full payment. The main purposes of a down payment are to ensure that the lending institution has enough capital to create money for a loan in fractional reserve banking systems and to recover some of the balance due on the loan in the event that the borrower defaults. In real estate, the asset is used as collateral in order to secure the loan against default. If the borrower fails to repay the loan, the lender is legally entitled to sell the asset and retain a portion of the proceeds sufficient to cover the remaining balance on the loan, including fees and interest added. A down payment in this case reduces the lender's risk to less than the value of the collateral, making it more likely that the lender will recover the full amount in the event of default. The size of the down payment thus determines the extent to which the lender is protected against the various factors that might reduce the value of the collateral, as well as lost profits between the time of the last payment and the eventual sale of the collateral.
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"down payment." Kamus.net. STANDS4 LLC, 2025. Web. 15 Jan. 2025. <https://www.kamus.net/english/down+payment>.
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