Understanding Down Payments and Equity
The down payment initiates your ownership progression. It determines your initial equity, influences your installment amount, and forms the financial foundation of your contract.
This article explains what the down payment is, how equity builds from it, and why these concepts matter within the contract structure.
What a Down Payment Is
A down payment is your initial ownership contribution. When you create an LTO contract, this payment activates the agreement and establishes your first equity position.
It is not a platform fee. Fees represent service costs. A down payment contributes toward your total ownership obligation.
It is not a refundable deposit. Down payments are applied toward the contract obligation and count toward ownership progression.
Down Payment Range
The platform offers a selectable range typically between 20% and 60% of the asset's reference value.
20%: Minimum standard down payment. Smaller initial commitment. Larger installments.
40%: Default midpoint option. Balanced structure.
60%: Larger initial commitment. Smaller installments.
Within this range, you determine how capital is allocated between initial payment and future installments.
How Down Payment Affects Your Contract
Effect on Installments
Higher down payment = lower installment amount.
Lower down payment = higher installment amount.
Example — 1 BTC contract at $68,000, 12-month term:
20% down ($13,600) → Monthly installment: approximately $2,600
35% down ($23,800) → Monthly installment: approximately $1,950
50% down ($34,000) → Monthly installment: approximately $1,300
60% down ($40,800) → Monthly installment: approximately $980
The asset remains the same. The payment structure differs.
Effect on Total Cost
Higher down payments reduce the financed portion of the asset, which reduces the financing component over the contract duration.
A 20% down payment typically results in a higher total financing cost than a 50% down payment for the same asset and term.
The platform displays total cost before confirmation. You review full cost details before activation.
Effect on Equity
Your initial equity equals your down payment percentage.
20% down → 20% equity at activation
35% down → 35% equity at activation
60% down → 60% equity at activation
Equity reflects the percentage of the contract value paid. Market price fluctuations do not change the percentage paid under the contract.
What Equity Means
Equity Is Ownership Percentage
Equity represents the percentage of the contract value you have paid at any point.
After down payment:
Equity = down payment %
During contract:
Equity increases with each installment.
After final payment:
Equity = 100%, and ownership transfers according to contract terms.
Equity Is Payment-Based
Each completed installment increases equity. Market price movement does not reduce your paid percentage under the contract.
If you have paid 65% of the contract value, that percentage reflects your payment progress. Market volatility does not alter the percentage paid.
If a contract terminates before completion, ownership does not transfer. Contract terms define the treatment of payments made.
Equity During Market Changes
Equity percentage tracks payment progress, not market price.
Example:
You paid 50% equity on 1 BTC originally referenced at $68,000.
You have paid $34,000 toward the contract.
If BTC rises to $85,000:
Equity percentage: 50%
Market value of that 50% changes proportionally.
If BTC falls to $52,000:
Equity percentage: 50%
Market value of that 50% changes proportionally.
Your equity percentage is payment-defined. Market value of that equity fluctuates.
Down Payment Currency
Two Options Available
LTO Token:
Down payment may be made using supported platform tokens where applicable.
USDT/USDC (Stablecoins):
Down payment may be made using supported stablecoins from your FUNDING wallet.
Which to Choose
Most users use stablecoins due to price stability and liquidity.
If using platform tokens, review current terms for any differences in structure or cost.
Equity Building Process
The Installment Contribution
Each payment increases equity according to the schedule calculated at contract activation.
The calculation considers:
Total asset value at reference
Down payment amount
Number of installments
APR structure
Your payment schedule displays equity progression after each installment.
Visualization
Ownership progresses toward 100%.
Down payment establishes the initial portion.
Each installment increases the percentage.
Final installment completes ownership.
Each completed payment contributes to contractual equity progression.
Choosing Your Down Payment Percentage
Factors to Consider
Available Capital
Allocate capital responsibly within your financial capacity.
Desired Installment Amount
Use the calculator to determine what installment level aligns with your income.
Total Cost Preference
Higher down payments reduce financed amount and typically reduce total financing cost.
Liquidity Needs
Higher down payment commits more capital upfront. Lower down payment preserves liquidity but increases installment amounts.
Using the Calculator
The LTO Calculator allows scenario testing before activation.
Enter:
Asset amount
Down payment percentage
Payment frequency
Contract length
View:
Down payment amount
Installment amount
Total contract cost
Equity progression
No contract activates until you confirm and sign.
Down Payment and Risk
What You Commit
Your down payment represents committed capital under contract terms.
If a contract terminates before completion, ownership does not transfer. Treatment of payments made is governed by contract provisions.
Only commit capital you can sustain for the contract duration.
Market Risk
Your equity has market exposure. If asset value declines, the market value of your equity declines proportionally.
This reflects asset market behavior.
What the Structure Does and Does Not Do
The contract structure removes price-triggered liquidation mechanics.
The structure does not remove market price volatility. Asset value may increase or decrease during the contract term.