What is down payment?

When you are ready to purchase an expensive good or service, you are asked to make a down payment, but what is down payment?

I will answer this question in great detail for you. 

A down payment is a type of payment that is made in the primary stages of a purchase of an expensive good or service which you wish to buy on Easy Monthly Installments (EMI). Down payment in EMI represents a percentage of the full purchase price. 

Interestingly, when you make a purchase the higher the down payment amount, the lower the interest payments on the remainder of the loan amount.

A large percentage of homebuyers in India rely on the home loan services offered by banks, therefore making down payments an indispensable part of the process. Generally, down payment is calculated between 10%-25% of the value of the property.

These days, lenders prefer a higher percentage of down payment. Making a higher down payment improves the chances of home loan approval. 

I will share a few tips with you to plan your home loan down payment beforehand as well.

Assuming that people plan to buy a home for themselves for years, I would suggest you increase your savings. Another way to arrange for a down payment is by liquidating your investments or assets such as mutual funds, recurring deposits, fixed deposits, or selling of your old vehicle, land, etc.

Now that you know what is down payment in EMI, you can start planning your finances accordingly.