Accrued interest occurs when interest charges are due and not paid in full, and the balance is then added to the amount owed.
The added amount is the accrued interest.
This situation can arise when a home loan is floating when there is an interest rate spike.
As mortgage payment become higher, the monthly required payment of the borrower remains the same.
Thus, creating a scenario where the payment does not fully cover the amount due.
Accrued interest occurs on every type of loans including personal loans and car loans, etc.
But when it occurs on a mortgage, it is usually referred to as negative amortization.
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