Netting Payment: What It Is, How It Works, and Why It Reduces Risk
Warren Team
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Key terms
- Down PaymentAn upfront payment made when purchasing a large item, typically expressed as a percentage of the total cost. Common for home purchases (usually 3-20%) and auto loans.
- Risk ToleranceYour ability and willingness to lose some or all of your original investment in exchange for potentially greater returns. Depends on factors like age, income, and financial goals.
- Minimum PaymentThe smallest amount you must pay each month to keep the account in good standing, typically 1-3% of the balance or $25-35, whichever is greater. Paying only the minimum results in expensive long-term interest.
- Returned Payment FeeA fee charged when a payment bounces due to insufficient funds in your bank account. Typically $25-40 and may also trigger late fees and penalty APR.
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