Finance
In Michigan, 'negative amortization' occurs when:
AThe loan balance decreases faster than the scheduled payment
BThe monthly payment is insufficient to cover the interest, causing the unpaid interest to be added to the principal balance✓ Correct
CThe interest rate decreases below the initial rate
DThe borrower skips payments with lender approval
Explanation
Negative amortization occurs when the minimum payment on a loan does not cover the accruing interest, causing the unpaid interest to be added to the principal. The loan balance grows over time rather than decreasing.
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