A down payment is a sum a buyer pays upfront when purchasing an expensive good such as a home or car. It represents a percentage of the total purchase price, and the balance is usually financed. A down payment can significantly reduce the amount the borrower owes to the lender, the amount of interest they will pay over the life of the loan, and monthly payment amounts.

• A down payment is paid upfront in a financial transaction, such as purchasing a home or car.
• Buyers often take out loans to finance the remainder of the purchase price.
• The higher the down payment, the less the buyer will need to borrow to complete the transaction and reduce the interest paid over the long term.