Okuzeka
Finance & Banking vocabulary · Loans & Credit

Negative amortization

Meaning in finance & banking, with examples

nounAdvanced term

In finance & banking, negative amortization means: An increase in a loan balance when unpaid interest is added to the amount owed.

In Turkish: negatif amortisman

How it is used

Use when payments fail to cover accruing interest; it does not mean ordinary depreciation.

Example sentences

  1. The low initial payments caused negative amortization on the loan.

    Unpaid interest makes the debt grow despite regular payments.

  2. The statement showed a higher balance after three months of negative amortization.

    The recorded debt includes interest added in earlier periods.

Common collocations

  • negative amortization feature
  • negative amortization balance
  • accrueTo build up gradually over time, as interest does on a loan or deposit; in accounting, to record income or costs when they are earned or incurred, not when cash moves.
  • principalThe original amount of money borrowed or invested, not including interest. Each loan payment usually covers some interest and some principal.

More terms: Loans & Credit

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This page explains English vocabulary for learners. It is not financial advice.