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Today, 15:49

Unlike collateral, down payments

are used to secure credit.

decrease risk for lenders.

affect the interest rate.

reduce overall debt.

+5
Answers (1)
  1. Today, 16:08
    0
    The answer is Reduce overall debt.

    There is a significant difference between collateral and down payments.

    Lets say that you want to borrow $ 10,000

    Collateral will require you to put up a certain asset (such as house or car) that will be taken by the lenders if you fail to pay it back.

    Down payment on the other hand, require you to pay a certain percentage of that total debt (let's say 10%) first-hand and reduce the amount you had to pay back in the future
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