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TeachMeFinance.com - explain capitalization Capitalization -- Adding unpaid accrued interest to the principal balance. Capitalizing interest increases the principal amount of the loan and the total cost of the loan. another definition... capitalization -- (1) the value of authorized or outstanding shares of stock or bonds in a business firm. (2) the process of adding earned but uncollected interest to the loan balance, a practice prohibited in some states. (3) a method of estimating the present value of future income. (4) the total value of an owner's investments in a business. Copyright © 2005 by Mark McCracken, All Rights Reserved. TeachMeFinance.com is an informational website, and should not be used as a substitute for professional financial or legal advice. TeachMeFinance.com and its owner recommend consultation with a professional financial advisor prior to any investment or financial decision. Please read our disclaimer.