Negative Amortization

Amortization is the process of repaying debt through monthly installments, such that the amount owed decreases with each payment. Negative amortization means that even if you make payments, what you owe will increase since you are not paying enough to cover the interest. Your lender may allow you to pay a minimum payment that does not cover the interest you owe. The unpaid interest is added to the amount borrowed, increasing the amount due.