What is one alternative to a down payment that can help reduce risk for lenders?

Providing collateral serves as a tangible assurance for lenders, which mitigates their risk in the event the borrower defaults on the loan. Collateral can be in the form of assets like property, savings accounts, or personal belongings that have a verifiable value. By having collateral backing the loan, lenders have the right to seize the asset to recover their losses, which significantly lowers the risk involved in lending. This arrangement can also potentially lead to better loan terms for the borrower, including lower interest rates or reduced down payment requirements, since the lender has additional security beyond the borrower's promise to repay.

While having a cosigner can also reduce risk for lenders by providing an additional party who is responsible for the loan, it does not involve a direct asset that the lender can claim if the borrower defaults. Similarly, increasing monthly payments can enhance the likelihood of repayment but does not change the risk dynamics associated with the loan directly. Improving credit scores can indicate better creditworthiness but does not provide immediate security to the lender in the form of collateral. Therefore, providing collateral is the most effective alternative to a down payment that directly addresses the lender's risk concerns.