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Know What Increases Your Total Loan Balance



Have you ever wondered, “What increases your total loan balance?” It’s a puzzling question, isn’t it? 

This article uncovers the mystery in a simple, easy-to-understand manner. Reading this, you’ll get valuable insights into how your loan balance can grow and how to keep it under control. 

Get ready to empower yourself with knowledge and take charge of your financial future.

Accrued Interest

Accrued interest is like a tiny seed that grows into a big tree. It’s the interest that adds up on your loan over time. This interest keeps piling up every day, week, or month you don’t pay.

The accrued interest can make your total loan balance bigger. So, if you want your loan tree to stay small, try to pay off this interest quickly.

Unpaid Fees

Unpaid fees are like pesky bugs that sneak up on your loan tree. These might include late fees, transaction fees, or even penalties. Like bugs can harm a tree, these unpaid fees and penalties can hurt your loan balance.

The more bugs there are, the more the tree gets damaged. Similarly, the more unpaid fees you have, the bigger your loan balance gets. So, it’s best to swat these bugs away as soon as possible by paying your fees on time.

Loan Modifications

Loan modifications are like expert gardeners who can reshape your loan tree. They are changes made to the terms of your loan by your loan provider. These changes could include lowering the variable interest rate, extending the loan term, or even changing the type of loan.

While these modifications can make your loan tree easier to manage, they can also lead to your total loan balance growth. So, understand all aspects of a loan modification before you agree to it.

Capitalization of Interest

Capitalization of interest is like the gardener adding a lot of fertilizer to your loan tree. This is when the capitalized interest, that tiny seed we discussed, is added back into your principal loan – the trunk of your loan tree. Now, this might sound good because you’re not paying it right away, but remember, more fertilizer can cause the tree to grow faster and bigger.

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When the tree grows bigger, so does your loan balance. This is because the interest is now calculated on this new, larger balance. 

Default or Missed Payments

Default or missed payments are like forgetting to water your loan tree. When you miss a payment, it’s like letting the soil around your tree dry out. This can harm your tree’s health and make it harder for the tree to stay strong and healthy.

In the same way, missed payments can increase your total loan balance because they often come with late fees. Plus, consistently missed payments can lead to default, dramatically increasing your loan balance and making it harder to catch up.

It’s crucial to stay on top of your payment schedule and explore alternative options, such as understanding 401(k) loans, if you encounter financial challenges to avoid further escalation of your total loan balance.

Taking Control of What Increases Your Total Loan Balance

Understanding what increases your total loan balance is like learning to take care of your loan tree. With this knowledge, you can prune away unwanted growth, keep pesky bugs at bay, and ensure your tree is nourished and healthy. 

Remember, it’s your tree, and you hold the power to control its growth. Keep learning, stay committed, and you can manage your loan balance successfully. You’ve got this!

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