NetLoan - Record a Capitalize Accrued Interest Payment

Overview

The Capitalize Accrued Interest payment type adds all accumulated accrued interest for the period to the loan principal balance — no cash changes hands. This is used when a loan's terms allow interest to compound into the balance (sometimes called PIK, or paid in kind) rather than be collected as a payment. This article covers the three workflows for recording a Capitalize Accrued Interest payment and explains how it affects the loan balance and schedule line fields.

Prerequisites

• Standard NetLoan access with permission to create loan modifications
• The loan must be active in NetLoan
• For Workflow 3 (direct payment entry + automod): access to the Update Schedules suitelet, or the automodification MR must be scheduled to run automatically — see NetLoan - Automatic Modifications

Step-by-Step

Navigation

• Modify button: Click Modify on the loan record header to open the Modify Loan suitelet
• Modification proposal: Click Create Modification Proposal on the loan record, or navigate to NetLoan > Loan Management > Modification Register > New
• Amortization tab: Open the loan record in edit mode and scroll down to the Amortization tab > Payments subtab

Via the Modify Button on the Loan

1. Open the loan record in NetLoan.
2. Click Modify in the loan record header to open the Modify Loan suitelet.
3. Set the Modification Type to Adjust Loan Balance.
4. Go to the Payments subtab.
5. Click Add to add a new payment line.
6. Set the Payment Type to Capitalize Accrued Interest. The payment amount will be forced to $0 automatically — this cannot be changed.
7. Set the Effective Date of the payment.
8. Click the Modify button to process the modification.

📷 Screenshot recommended: Modify Loan suitelet with Adjust Loan Balance selected and a Capitalize Accrued Interest payment line on the Payments subtab

Via a Modification Proposal Record

1. Open the loan record. If the Create Modification Proposal button is visible in the record header, click it. If the button is not shown, navigate to NetLoan > Loan Management > Modification Register > New to create a new modification proposal.
2. Set the Modification Type to Adjust Loan Balance.
3. Go to the Payments subtab.
4. Click Add to add a new payment line.
5. Set the Payment Type to Capitalize Accrued Interest. The amount will be $0.
6. Set the Effective Date of the payment.
7. Save the proposal.
8. The modification proposal must have a status of Approved before it will process. If the status was not set to Approved during entry, it will need to be updated before the modification runs. There is no out-of-the-box approval workflow in NetLoan — an approval process must be configured by you or your implementation partner.

Via Direct Payment Entry on the Loan

1. Open the loan record and click Edit (edit permission on the loan record is required). Scroll down to the Amortization tab.
2. Go to the Payments subtab.
3. Set the Payment Type to Capitalize Accrued Interest.
4. Set the Effective Date of the payment. The amount will remain $0.
5. Click Add on the payment line, then save the loan record.
6. Process the modification using one of the following:
7. Navigate to NetLoan > Mass Update Loans > Update Loan Schedules and manually trigger the automodification mass results (MR).
8. Wait for the automod MR to run on its scheduled frequency.

This is the recommended approach for processing these payments via API. Payment records can also be uploaded via CSV using NetLoan's import tools.  

Considerations

The payment amount is always $0: Capitalize Accrued Interest is listed in NetLoan's irrelevant amount payment types — the amount field is locked to $0 in the UI. Attempting to enter a dollar amount will have no effect. No cash moves when this payment type is applied.

Schedule line fields after capitalization. After processing, the schedule line for the capitalization period will show:

• Capitalized Interest (custrecord_da_lse_cap_interest): A positive value equal to the amount of interest capitalized that period.
• Accumulated Capitalized Interest (custrecord_da_lse_accum_cap_interest): Increases by the same amount, reflecting the running total of all capitalized interest embedded in the principal.
• Principal: The loan's outstanding principal balance increases by the amount of interest capitalized that period.

GL impact: Capitalized interest posts to the same accounts as regular interest, accrued interest, and principal accounts selected on the loan type. No separate GL account is needed or created for capitalized interest.

Schedule Calculation Type determines the downstream effect: The Schedule Calculation Type configured on the loan controls how capitalized interest affects the amortization going forward — specifically whether it adjusts the recurring payment amount, extends the loan term, or changes the balloon payment. Confirm the correct Schedule Calculation Type is set before applying this payment type.

Future interest compounds: Once capitalized, the interest becomes part of the principal balance. Future interest accrues on the higher balance, compounding the borrower's obligation over time.

This action can be reversed: Like other modification types, a Capitalize Accrued Interest modification creates a reversible record. See NetLoan - Modification Reversals if you need to undo it.

Related Articles

• NetLoan — Understanding Interest Capitalization
• NetLoan — Record a Decapitalization Payment
• NetLoan - Loan Balance Adjustment
• NetLoan - Modification Reversals
• NetLoan - Automatic Modifications
• NetLoan - Update Loan Schedules

Record Structure

NetLoan Payment Record (necessary for API)