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Glossary Finance

Principal

The principal is the original amount of money borrowed or invested, before any interest is added.

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In more detail

On a loan, the principal is the balance you still owe excluding interest; each payment reduces it by the part of the payment that is not interest. Paying extra toward principal shortens a loan and lowers total interest. On an investment, it is the amount you started with.

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See also

  • Glossary Amortization
    Amortization is paying off a debt through regular instalments that each cover interest plus part of the principal.
  • Glossary Compound interest
    Compound interest is interest calculated on the original amount plus all the interest already added, so growth builds on itself.
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