Several factors can increase your total loan balance over time:
- Accrued Interest: Interest accumulates on the principal amount you borrowed. If you don't pay the interest as it accrues, it can be added to your loan balance, increasing the total amount owed. This is common with student loans during deferment or forbearance periods
- Capitalized Interest: Unpaid interest and fees can be added to the principal balance after periods like deferment, forbearance, or grace periods, causing your loan balance to grow
- Borrowing More: Taking additional loans or using more credit (such as charging more on credit cards) directly increases your loan balance
- Making Late or Missed Payments: Late payments often incur fees and penalties, which are added to your balance. Missing payments can also cause interest to continue accruing, increasing the total owed
- Paying Less Than the Minimum Due: If you pay less than the minimum required amount, your balance can increase due to fees and unpaid interest
- Variable Interest Rates: Loans with variable or adjustable interest rates can see their rates rise, increasing the interest accrued and potentially your total loan balance if payments don't cover the higher interest
- Fees and Penalties: Additional charges such as late fees, loan origination fees, payment processing fees, or account maintenance fees can add to your loan balance
- Negative Amortization: This happens when your payments are insufficient to cover the interest, causing unpaid interest to be added to the principal, increasing the balance
- Deferred Payments: During deferment or grace periods, interest may still accrue and be added to your loan balance when payments resume
In summary, your total loan balance increases due to unpaid interest (including capitalized interest), fees, penalties, borrowing more, insufficient or late payments, and changes in variable interest rates. Managing payments carefully and understanding your loan terms can help control balance growth.
