I forgot to tell my banker that I wanted to make a down payment on my auto loan. According to my banker, the interest rate wouldn't have changed from the lower principal, only my monthly minimum payments will be higher due to this. This part is inconsequential to me: I plan on paying it down aggressively anyway.

Are there any unfavorable side effects from making the down payment as just a regular lump sum payment to the loan instead of actually reducing the principal of the loan? Is it worth re-doing the loan properly with the down payment?

2 Answers 2


Some down sides to a low down payment:

  • A higher DP which leads to a lower monthly payment gives you the flexibility to sometimes not aggressively pay down the loan.
  • The high loan certainly impacts your credit score for "a while" (for some non-specific measure of "while").
  • In some jurisdictions, early payment fees/penalties might be written into the loan contract.

But on the plus side:

  • You've still got a lot of cash on hand in case Something Unexpected happens (and you don't already have an Emergency/Rainy Day Fund).
  • Thanks for your answer. To clarify, I still plan on putting the same amount that I would have paid as a down payment as just a lump sum payment immediately after receiving the loan, so I won't have the cash on hand. Would you recommend against this?
    – Klaycon
    Jan 15, 2020 at 18:14
  • 2
    @Klaycon that's where "In some jurisdictions, early payment fees/penalties might be written into the loan contract" becomes important. Note, though, that if the deed is done, then it's done. But even if it's not, your fiscal life is hardly ruined.
    – RonJohn
    Jan 15, 2020 at 18:21

Making the payment as lump sum will reduce the principal of the loan. The only real downside to this approach (as opposed to having already paid it upfront and therefore borrowed less) is that you borrowed more money than you needed to, so more interest accrues at first.

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