# Negative Amortization

Negative amortization can occur on a loan based on the minimum payment requirements.

Negative amortization occurs when the regular payment amount is less than the amount of interest that has accrued since the last payment. The unpaid interest is added to the principal and so the principal balance increased instead of decreases, even though payments are made regularly. Amortization is the paying off of the principal balance, and so when the principal balance increases it is called negative amortization.

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