It certainly is possible . . . I'll illustrate with a specific example.1. Is it possible that the interest rate can be increased to a level where
the loan term becomes infinite unless the periodic repayment is increased?
We take out a $12,000 loan at 9% to be repaid in 48 equal monthly payments.
. . The amortization formula gives us a monthly payment of about $299.
Suppose our bank raises the rate to 29.9% . . . (yike!)
The monthly interest will be: .
Our monthly payment covers the interest only;
. . none of it is used to reduce the amount of the loan.
We will always owe them $12,000 ... and make monthly payments forever.