What Increases Your Total Loan Balance?
When you apply for a loan, you expect your balance to decrease as you make your payments each month. But certain factors, such as missed payments, deferments, capitalized interest and more can increase your total loan balance.
To avoid watching your loan balance grow instead of shrink, it's crucial to understand when and how the choices you make may add to what you owe. Read on to learn what can increase your total loan balance and how to avoid adding to your debt.
5 Things That Can Increase Your Total Loan Balance
When you make your payments on time and in full each month, your loan balance typically decreases until, eventually, it reaches $0. But in certain situations, your balance could increase over time. Here are several reasons why.
1. Interest Capitalization
Interest capitalization occurs when lenders add unpaid interest to a loan balance. It's a common result of grace periods, deferments and forbearance, and it means you're paying interest on interest.
A grace period is part of a loan agreement allowing borrowers a specific amount of time to avoid payments without penalty. For example, certain types of student loans allow you to put off repayment until you're six months out of school. However, interest may continue to accrue during the grace period. If lenders add the accrued interest to your loan balance when the grace period ends, it increases the amount you have to repay.
Forbearance and deferment are hardship options that allow you to pause your loan payments for a certain amount of time without the risk of defaulting. Unlike a grace period, they aren't part of the original loan agreement. They're special arrangements you work out with your lender when you're struggling financially.
These pauses provide an opportunity to get your finances in order, but in many cases they don't stop interest from accruing. If your loan balance continues to accrue interest throughout the deferment or forbearance period, it will add to what you owe.
Tip: Not all loans accrue interest during grace periods or deferments. If you think you'll need to use either option, check with your lender to find out what their policy is.
2. Fees
Lenders often charge various fees, such as late fees, origination fees and closing costs, that affect the amount you have to repay.
- Late fees: Lenders typically assess penalties when you don't make your payments on time. Some may add late fees to your total loan balance, increasing the amount accruing interest.
- Origination fees: These fees cover the lender's cost to process your application and are common among mortgages, personal loans, auto loans and student loans. Lenders may deduct the origination fee from the amount you receive when your loan is funded or add it to your total loan balance.
- Closing costs: If you take out a mortgage to buy a home, you'll be required to pay various fees that are collectively referred to as closing costs. You can pay the fees upfront at closing, or your lender may allow you to roll these expenses into your mortgage, adding to your balance.
3. Negative Amortization
Negative amortization occurs when you pay less than the interest due, and the lender adds the remaining interest charges to your loan balance. This can happen if a lender allows you to make minimum payments that are not enough to cover the interest owed. Because interest accrues on the total amount you owe, your loan balance can balloon quickly if you routinely don't cover your interest charges.
4. Refinancing
Refinancing replaces your existing loan with a new one. It can help you snag a lower interest rate, reduce your monthly payments by extending your loan term or allow you to pay off your loan faster by opting for a shorter term.
But if you get extra cash with your new loan, such as when you complete a cash-out refinance on your mortgage, it'll increase your total loan balance.
5. Not Paying as Agreed
Missing payments and making partial payments can send your loan balance in the wrong direction. When you don't make your monthly payment, the loan principal isn't reduced, and your total balance continues accruing interest. As interest accrues, your balance grows and the amount you owe increases.
Paying less than what you owe has a similar effect. If you don't pay the minimum due, the principal balance decreases at a slower rate, leaving a larger balance to accrue interest. As interest charges add up, your total loan balance can increase.
Compare personal loan rates
Find APRs from 6.25% to 35.99% and flexible terms of 24 to 120 months. Loan amounts range from $1,000 up to $250,000, with funding available the same day or up to 3 days.
Offers from our partners
View all of our Best Personal Loans for 2026 to see what you’re likely to qualify for, and the rates and terms you might get.
How Do I Find My Total Loan Balance?
Monitoring your loan balance can help you stay motivated to keep up with your payments as you watch what you owe decrease. Here are a few ways to identify your remaining balance and find out how many payments you have left.
- Monthly statement: Depending on the lender, your loan balance may appear on your statement each month, making it easy to see how much you still owe.
- Online: Most lenders have online portals where you can manage your account. Log in to find out how much you owe, how many payments you have left or to make a payment.
- Loan servicer: If you want a more personal touch, your loan servicer can help. You can typically get the information you need by giving them a call or chatting online.
- Credit report: Your credit reports include information on all your installment loans and revolving credit accounts, including your current balance and payment history. Regularly monitoring your credit report can help you spot any inaccuracies and catch fraud early. You can get a free copy of your credit reports from all three consumer credit bureaus (Experian, TransUnion and Equifax) each week at AnnualCreditReport.com. You can also get your Experian credit report for free anytime.
How to Pay Off Your Loan Faster
The sooner you pay off your loan, the less you'll pay in interest charges. If your finances allow it, here are some ways to reduce your balance faster:
- Increase your payment frequency. Consider making biweekly instead of monthly payments to pay off your loan faster. If you can't commit to biweekly installments, make extra payments when you can. Even adding one to two extra payments each year can make a difference.
- Pay more than the minimum. The minimum payment due is the amount you have to pay each month to keep your account current, prevent late fees and avoid negative credit consequences. Adding a little extra to your payment each month can help you reduce your debt faster.
- Refinance. Refinancing into a shorter-term loan will move up your payoff date. If your credit has improved or rates have dropped since you took out your original loan, you may even qualify for a lower interest rate. Keep in mind that shortening your loan term may increase your monthly payment. It's important to balance your total loan costs with the affordability of your monthly payments. Otherwise, you may damage your credit and rack up fees and penalties that increase the amount you have to repay.
- Use extra income. If you are getting a tax return or bonus, have extra income from a side gig or picked up an extra shift at work, consider using the money to make an extra loan payment.
Tip: Some loans have prepayment penalties that may not make paying off your loan early worth it. Be sure to check the terms and conditions of your loan agreement before paying more than the minimum due or making extra payments.
Keep an Eye on Your Credit
Making your payments in full and on time every month will help you avoid increases to your total loan balance. It's also one of the best things you can do to maintain solid credit because your payment history has the most significant effect on your credit scores.
Get your FICO® ScoreΘ for free from Experian at any time to see how making your loan payments affects your score.
Need a loan?
Whether you're shopping for a car or facing a last-minute expense, compare loan offers matched to your credit profile.
Start now for free
About the author
Jennifer Brozic
Jennifer Brozic is a freelance content marketing writer specializing in personal finance topics, including building credit, personal loans, auto loans, credit cards, mortgages, budgeting, insurance, retirement planning and more.
Read more from Jennifer