capitalization. Capitalization is when all unpaid interest is added to the principal balance of your loan. Capitalization increases your total amount to be repaid because you will then have to pay interest on the increased principal amount.

Capitalization occurs when your lender or loan servicer adds the amount of unpaid, accrued interest on your student loan to your loan balance. Once this interest has been capitalized, interest begins to accrue on that new, higher loan balance.

Interest is capitalized during the construction period for a) assets built for a company's own use as well as b) assets constructed as discrete projects for sale or lease (a ship or a real estate development, for example) This excludes from interest capitalization inventories that are routinely manufactured in large quantities on a repetitive basis and assets that already are in use or are ready for their intended use. Hence Only assest that are constructed as discrete projects qualify for interest capitalization. Only interest incurred during the construction period is eligible for capitalization.

Interest charged is normally an expense - in that it is a deduction from an account. Deferring payment of the interest, means the money that would have been paid is still in the account - making it an asset.

C. G. Blackadar has written:

'Dynamic capitalization' -- subject(s): Interest, Mathematical models, Real property, Valuation