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What is negative amortization?

Question:

What is negative amortization?

Negative Amortization:

Amortization means 'to kill off' and is a term used to describe how a loan is paid down over time. Amortization schedules in business help them prepare for the future and calculate expected payments with complex interest rates. A common amortization table used are mortgage amortization schedules that show how much interest is paid each month over principle.

Answer and Explanation:

Negative amortization or NegAm is an amortization schedule for a loan that increases in principle balance because the payment does not cover the...

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Loan Types: Pure Discount, Interest-Only & Amortization

from Finance 101: Principles of Finance

Chapter 6 / Lesson 6
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