Your total loan balance can increase due to several factors:
- Interest Accrual: Interest charges accumulate over time on your loan principal. If you have a variable interest rate, increases in the rate can cause your balance to grow faster. Unpaid interest may be capitalized (added to the principal), increasing your total balance
- Late or Missed Payments: Making late payments or missing payments often results in late fees and penalties, which are added to your loan balance. Additionally, interest continues to accrue on the unpaid balance, further increasing the amount owed
- Paying Less Than the Minimum Due: If you pay less than the minimum required amount, the unpaid portion may be added to your balance, causing it to rise
- Borrowing More: Taking out additional loans or using more credit (such as on credit cards) directly increases your loan balance
- Deferred Payments and Forbearance: During deferment or forbearance periods, interest may continue to accrue even if payments are paused. This accrued interest can be capitalized, increasing your total balance once repayment resumes
- Negative Amortization: This occurs when your payments are insufficient to cover the interest due, causing unpaid interest to be added to the principal balance, thus increasing the loan amount owed
- Fees and Penalties: Besides late fees, other fees such as processing fees or account maintenance charges can increase your loan balance
In summary, your loan balance increases primarily due to accrued interest (including capitalized interest), fees and penalties from late or missed payments, borrowing additional amounts, paying less than required, and deferred payments where interest continues to accumulate. Managing timely and full payments can help prevent your loan balance from growing unexpectedly.
