Personal Finance – What is a down payment ?

A term such as a down payment may seem obvious to many people who have experience in dealing with financial matters, but it makes a lot of difference to somebody who is getting into the matters of loans, EMI’s, etc for the first time. I know a lot of younger people who did not plan for a down payment when considering a loan, and had to scramble to arrange the funds for a down payment (and in their cases, since they did have much of a credit rating, there was no flexibility in down payment terms for them). Read more about what a down payment is, and what sort of planning is required (link to article):

Down payment is the amount of money that you have pay from your end. Typically, banks and other financial institutions expect buyers to pay around 15-20% as down payment. So, for a house costing Rs. 40 lakhs, the amount to be paid as down payment could be be something like Rs. 6-8 lakhs, which is a large amount of money. A lot of people do not really expect to pay this kind of money, and get into problems when they have to make such down payments. Banks can even increase this amount of down payment when times are bad, or the person has a lower credit rating.

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