Final answer:
When a loan balance grows due to deferred interest, the interest is not being paid currently and is added to the principal balance, resulting in the loan balance increasing over time.
Step-by-step explanation:
When a loan balance grows due to deferred interest, it means that the interest on the loan is not being paid currently and is added to the principal balance. This results in the loan balance increasing over time. For example, let's say you have a loan with a balance of $1,000 and an interest rate of 5%. If you defer the interest payment for one year, the interest of $50 will be added to the principal balance, making it $1,050.