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Negative amortization

• A loan repayment schedule in which the outstanding principal balance of the loan increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount required to amortize the loan. The unpaid interest is added to the outstanding principal, to be repaid later.

• Is the increment to principal over time. This feature reflects the inadequacy of the periodic payment to service both principal and interest. It usually is the result of the addition of interest to the outstanding loan balance.

 
 Embedded terms in definition
 Amortize
Cover
Interest
Principal
Time
 
 Related Terms
 Amortization
Amortization factor
Earnings before interest, taxes, depreciation, and amortization
Interest impact on instalment to amortize or amortization
Loan amortization
Loan amortization schedule
Negative carry
Negative convexity
Negative covenant
Negative duration
Negative leverage
Negative pledge clause
Negative yield curve
Planned amortization class
Targeted amortization class

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