What is the initial payment made when purchasing something on credit called?

The initial payment made when purchasing something on credit is called a down payment. This payment is typically made upfront as a portion of the total purchase price, reducing the amount that needs to be financed, which can make monthly payments lower. The purpose of a down payment is to show commitment to the purchase and to provide the lender with some assurance since it reduces their risk.

By making a down payment, a buyer is directly investing some of their own money into the purchase, which can also demonstrate financial responsibility and enhance approval chances for financing. This practice is common in various types of credit purchases, such as homes, cars, or other significant assets.

Other terms, such as installment and service charge, relate to different aspects of financing or purchasing, and a late fee is a penalty for not making a payment on time, all of which do not apply to the initial payment concept.