how do you calculate capitalized interest 
capitalized interest is calculated the same way as any other type of interest the prevailing rate of interest is multiplied by the prevailing principal balance of debt for a given period and considerations are made for the number of days outstanding this balance is then added to the original principal balance amount so it may be wise to sometimes track the original principal balance and the balance of interest that has accumulated 2the bottom linecapitalized interest is the unpaid amount of interest that is added to the principal balance of a loan capital interest occurs when the borrower is not making payments on the loan and interest continues to accrue when the interest is added to the principal balance the borrower is then responsible for paying interest on the higher balance in future periods as the basis for the calculation of interest is higher 2 for student loans borrowers may experience capitalized interest during deferment periods when they don t need to paying interest during school 4