It is true that capitalization of interest is adding accrued interest to the principal balance, so that the interest-bearing principal balance of the loan increases.
What is interest capitalization?
This is when an unpaid interest is rolled over with the principal amount, which increase the overall amount to be paid. It is the inclusion of an unpaid interest to the principal balance of the loan taken.
Hence, Capitalization of interest is adding accrued interest to the principal balance, so that the interest-bearing principal balance of the loan increases.
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