I am learning about hire purchase and still dont understand what is downpayment
In: Mathematics
The term “hire purchase” is called an “installment plan” in U.S. English. Basically the same thing.
Let’s say you want to buy a new mattress for your bed and it costs $1000. You don’t have $1000 now.
No problem, the store lets you take the mattress home now but make payments over time.
The down payment is simply the amount you have to pay now. For example, maybe they require you to pay $200 now, and then $100/month for 8 months, totalling $1000.
The down payment is there to prevent people from just getting something for free. Even if you’re irresponsible and you never make any more payments, at least the store gets the down payment. It also ensures you’re not buying something way out of your price range. If you want to buy a $1000 mattress, paying $200 up front seems pretty reasonable. If you can’t afford to pay $200 now, then they’re going to be worried that you won’t be able to afford the $100 payment a month from now.
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