Q:

What is a down payment?

A:

Quick Answer

A down payment is an amount of money that is paid up front when an item is being purchased on credit. This often occurs during the purchase of a vehicle or a home. This payment lowers the total amount of money borrowed for the purchase.

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Full Answer

Many consumers choose to make a down payment to reduce their total monthly payment amounts. A down payment may also be a requirement set by a lender when approving a loan. In some circumstances, down payments are not considered refundable if something occurs that causes the transaction to fail; this varies depending on the terms of the purchase contract.

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