Is there potential for “negative amortization”?
Negative amortization occurs when a borrower’s loan payments are insufficient to pay the accrued interest on the loan. If the amount of deposits you make into the Green Account for any monthly billing period is less than the amount of withdrawals plus your monthly finance charge, then your Green Account loan balance will increase. Your Green Account monthly finance charge will be added to the account balance effectively resulting in negative amortization (to the extent of your remaining available credit limit). However, this effect is offset by your Green Account deposits accounted for as loan principal payments.
