Option Arm Loan:

A Negative Amortization Loan (or NEG AM Loan) is a loan with an extremely low interest rate (pay rate). The interest rate is so low that it is actually lower than the interest rates offered on an Interest Only Loan. Because this rate is so low and below the Interest Only rate, there is a payment shortfall, which is added back onto the principle balance of the loan.

Other names for a Negative Amortization Loan include; NEG AM Loans, Deferred Interest Loans, Flexible Payment Loans, Pick-A-Payment Loans, Cashflow ARMS, Option ARMS, Power ARMS and Smart Choice Loans.