As the name suggests, the minimum payment refers to the smallest amount a borrower must pay each month to keep a loan or credit account in good standing. For loans like credit cards or mortgages, it allows the borrower to avoid penalties, though paying only the minimum may result in higher overall interest costs. You must remember that in mortgages, minimum payments often include the interest portion of the loan but may not reduce the principal balance to that extent. Hence, it may lead to the extension of the total repayment period.