A down payment is a sum of money paid off periodically by a borrower as an initial installment towards a larger loan. It’s an important part of the borrowing process, as it shows lenders that potential borrowers are serious about taking on the debt obligation. Down payments also act as security for lenders and indicate that the borrower has some measure of ownership of the asset they’re purchasing. By providing a down payment, borrowers can lower their overall interest payments in the long run.