Finance
Negative amortization occurs when:
AThe loan balance decreases faster than the amortization schedule
BMonthly payments are less than the interest owed, causing the unpaid interest to be added to the loan balance✓ Correct
CThe borrower makes extra principal payments
DInterest rates decline after the loan is originated
Explanation
Negative amortization occurs when monthly payments are insufficient to cover the interest due. The unpaid interest is added to the principal balance, causing the loan balance to grow rather than decrease over time.
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