Question

How would a bigger down payment be beneficial to borrowers? a. A bigger down payment is only beneficial for a person applying for a home loan. B. A bigger down payment is essentially a bribe to the dealership, guaranteeing a few extra bells and whistles for free. C. A bigger down payment means that the borrower has more money, and can afford a bigger loan. D. A bigger down payment is money paid toward principal, interest free, which also decreases the amount paid monthly.

Answer 1

The correct option is D, A bigger down payment is money paid toward principal, interest-free, which also decreases the amount paid monthly.

What is interest?

The amount of money a lender or financial organization earns for lending out money is known as interest.

We know that monthly payments include the interest on the principal amount that is not been paid during the purchase of an item, if the down payment is more than the principal amount that the customer does not pay will decrease which will decrease the loan amount, thus, the interest on the principal amount will decrease as well.

Now, as the interest and the principal amount have both is been reduced, therefore, the monthly instalment(monthly payment) will be reduced as well.

Hence, the correct option is D, A bigger down payment is money paid toward principal, interest-free, which also decreases the amount paid monthly.

Learn more about Interest:

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