How can a loan balance increase even when payments are being made?
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With negative amortization, the payment is not enough to cover the interest due, and the unpaid amount is added to principal under the loan terms. The balance therefore grows. That is different from ordinary amortization, where scheduled payments reduce principal. The CFPB identifies this as a feature borrowers should look for in the Loan Estimate.
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Discussion prompt: Does the payment cover all accrued interest before reducing principal?