Hello, Ganymede!

It certainly1. 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?ispossible . . . I'll illustrate with a specific example.

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;

. .noneof it is used to reduce the amount of the loan.

We willalwaysowe them $12,000 ... and make monthly paymentsforever.