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Capitalized Interest: How Does It Work?

Interest capitalization happens when unpaid interest gets added onto your principal loan balance. It can make your loan more expensive, but there may be ways to avoid it.

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By Rebecca Safier

Written by

Rebecca Safier

Freelance writer

Rebecca has more than eight years of experience in personal finance. Her work has been featured by CNN, U.S. News & World Report, New York Post, and Buy Side WSJ.

Edited by Renee Fleck

Written by

Renee Fleck

Renee Fleck is a student loans editor with over six years of experience. Her work has been featured in Fast Company, Morning Brew, and Sidebar.io, among other online publications. She is fluent in Spanish and French and enjoys traveling to new places.

Updated September 17, 2024

Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

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