Interest capitalization occurs when unpaid accrued interest is added to the original principal balance of a loan or an investment. This results in a new, larger principal amount on which future interest will be calculated, leading to a compounding effect.

• Total Interest Capitalized: This is the total amount of interest that accrued over the specified "Capitalization Period" (compounding at your chosen "Accrual Compounding Frequency") and has now been added to the principal.
• New Principal Balance: This is your loan or investment balance after the accrued interest has been capitalized. Future interest calculations will be based on this new, higher amount.

This is common in scenarios like student loan deferment periods or some types of construction loans. The terms and timing of capitalization can vary significantly by lender or financial institution, so always refer to your specific agreements.