Interest Capitalization

Overview

Interest capitalization is a method where the interest is accrued on any unpaid interest. Interest is calculated on the principal amount and on the unpaid interest till date in case of non-payment. It is also termed as 'Interest on Interest'. If the capitalization frequency is higher, the capitalized interest grows. For example, if the capitalization frequency is weekly instead of monthly, the capitalized interest growth is higher. This feature is available inCL Loan version 2.1005.

The fields Is Interest Posting Transaction Enabled, Interest Posting Frequency, Is Capitalization Enabled, and Capitalization Frequency are added to the Lending Product and CL Contract page to enable capitalization and interest posting on the loan. For more information on these fields, refer to the section Loan.

If these fields are not visible on the interface by default, you can add these manually on your page layout. For more information on adding these fields to the page layout, refer to the section Modifying the Page Layout. 

Recommended Layout

The following image displays the suggested layout for Interest Capitalization: