Finance
A negative amortization loan means:
AThe loan balance decreases faster than normal
BPayments are insufficient to cover interest, so the unpaid interest is added to the loan balance✓ Correct
CThe borrower pays off principal before interest
DThe loan has a negative interest rate
Explanation
Negative amortization occurs when minimum payments don't cover all the interest due, so the unpaid interest is added to the principal balance. The loan balance actually grows over time. This was common in option ARMs before the 2008 crisis.
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