Finance
A Montana borrower considering a 'negative amortization' loan should understand that:
ATheir loan balance decreases faster than a conventional loan
BTheir monthly payments may be less than the interest owed, causing the unpaid interest to be added to the principal balance, increasing the loan amount over time✓ Correct
CThe interest rate is always fixed for the life of the loan
DNegative amortization is prohibited by Montana law
Explanation
In a negative amortization loan, minimum payments may not cover all the interest due. The shortfall is added to the principal, causing the loan balance to grow (negative amortization) rather than decrease over time.
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