Finance
Negative amortization occurs when:
AThe interest rate decreases below the initial rate
BMonthly payments are less than the interest accruing, causing the loan balance to increase✓ Correct
CThe borrower pays off the loan early
DThe lender charges a prepayment penalty
Explanation
Negative amortization occurs when the scheduled payment is insufficient to cover the accruing interest, so the unpaid interest is added to the loan balance, which grows over time.
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