Negatively amortizing loan
Negatively amortizing loan
A negatively amortizing loan is a financing arrangement where the minimum periodic payments due are less than the interest accrued in the same period. The unpaid interest is added into the loan, thus increasing the principal balance. A loan with this structure will have some limit on the amount of negative amortization that can occur. After that limit is reached, the borrower will have to make fully amortizing payments.
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