What is Down Payment in Loan?
21 May, 2024
Synopsis:
When you take a secured loan like Home or Vehicle Loan, your lender asks for a down payment.
The down payment you must provide is typically 10% or more of the loan value or asset’s price.
You can make down payments for your loans conveniently via HDFC Bank’s PayZapp app.
Loans make it incredibly convenient for borrowers to afford high-value products. Whether you want to buy an expensive phone, a property, or just get funds to expand your business, you can take out a loan. The lender charges interest on the money lent, and you need to repay the loan in Equated Monthly Instalments or EMIs, which you can easily pay online through digital payment platforms like HDFC Bank’s PayZapp. In some cases, when the loan value is exceptionally high, lenders ask you to provide a down payment. Let us understand the meaning of down payment and how you can utilize PayZapp to pay the same.
What Is Down Payment Meaning?
A down payment refers to the initial payment you are required to make upfront when acquiring a loan, typically when purchasing a high-value asset such as a house or a vehicle. It is the portion of the total purchase price that you must pay out of your pocket, when taking on a secured loan. In essence, it is your stake in the purchase, indicating commitment and your financial capability to repay the loan.
Importance of Down Payment
Following are some key factors that explain why making a down payment is important:
Reduced Loan Amount
A substantial down payment reduces the amount of money you need to borrow. A lower loan amount often translates to lower monthly payments and a smaller amount spent on interest payment.Lower Interest Rates
Lenders often offer more favourable interest rates if you provide a significant down payment. This is because a sizable down payment lowers the lender’s risk, making their investment more secure.Equity Building
By making a substantial down payment, you immediately gain equity in the purchased asset. Equity represents ownership value, which can be beneficial in various ways, including refinancing or leveraging for future investments.Improved Loan Approval Odds
A substantial down payment can strengthen your loan application, making it more appealing to lenders. It demonstrates financial responsibility and reduces the lender’s perceived risk, thereby increasing the likelihood of loan approval.
How Is The Down Payment Amount Determined?
The exact amount required for a down payment varies depending on several factors:
Type of Loan
Different types of loans have varying down payment requirements. For example, conventional home loans typically require a down payment of around 20% of the purchase price, while special home loan schemes and vehicle loan providers may accept down payments as low as 10%.Lender Requirements
Lenders may have specific criteria regarding down payments as well. They may determine the amount after assessing your income, monthly financial obligations and creditworthiness, among other things.Purchase Price
The total cost of the purchase directly influences the down payment amount. Generally, a higher purchase price necessitates a larger down payment.Market Conditions
Economic conditions and lending trends can impact down payment requirements. During economic uncertainties, lenders may tighten their lending standards and insist on larger down payments.
Different Methods To Make Down Payment Of A Loan
There are various methods to make a down payment on a loan. These include:
Cash payment: This is a direct and straightforward method involving physical currency.
Bank transfer: This method ensures secure electronic transfer of funds from your account to the lender.
Personal cheque: This is the conventional method of issuing a cheque drawn from your account to cover the down payment.
Online payment platforms (e.g., PayZapp): These convenient digital solutions allow you to make payments using smartphones or computers.
Debit or Credit Card transactions: This method offers flexibility and potential rewards for you as a cardholder, allowing you to make down payments using your cards.
Each method presents distinct advantages, catering to your diverse preferences and needs.
How To Make Down Payments Through PayZapp
The process to make a down payment from PayZapp is straightforward:
Login to PayZapp Online Payment App and go to ‘Bills and Recharges’ on the homepage.
Click on ‘More’ and select ‘Financial Services.’ Now select the ‘Loan’ option.
From the list of banks choose your loan provider, and enter the loan account number.
Enter the down payment amount you wish to pay and choose your preferred payment mode.
You will get a confirmation message once the transaction is complete.
Click here to make upi payment through PayZapp on your IOS phone.
Click here to download PayZapp UPI Payment App on your Android phone.
Make Down Payments For Your Loans Conveniently Via PayZapp
Understanding what is meant by down payment is essential for anyone looking to apply for a secured loan. Whether you wish to make a significant down payment or the minimum amount requested by the lender, you can do so easily through PayZapp. Besides making the down payment, you can also leverage PayZapp to repay your loan EMIs. Moreover, you can set up recurring payments for your EMIs, and find your frequent billers on PayZapp’s home page so that you never default on loan repayment.
Manage your loan down payments and EMIs seamlessly. Download PayZapp today!
*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
