Finance
What is negative amortization in Nevada lending and what risk does it create?
AWhen the loan balance increases because minimum payments don't cover the full interest due, resulting in the unpaid interest being added to the principal✓ Correct
BA state where the loan principal decreases faster than scheduled
CA type of loan with declining interest over time
DA loan modification reducing the principal below original amount
Explanation
Negative amortization occurs when the monthly payment is less than the interest accruing on the loan, causing the unpaid interest to be added to the principal. The balance grows instead of shrinking. This creates significant payment shock risk when the loan eventually recasts to fully amortizing payments.
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