Financing, 9% of the examination
Amortization
The gradual repayment of loan principal through periodic payments over time.
A fully amortized loan reaches a zero balance at maturity. A partially amortized loan leaves a balloon balance. Negative amortization occurs when scheduled payments do not cover accrued interest and the unpaid amount is added to principal.
Test the distinction
A relevant question from Financing, selected because its facts or explanation use this concept.
A borrower takes a loan where the payment does not cover the accruing interest. What is the result?
Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanor under B&P Code section 123.
Primary sources
Use these authorities when a course summary, forum answer, or older flashcard conflicts with the current California rule.