Principal (finance)

Principal is the original amount borrowed, invested, or still owed, excluding interest and investment returns. Its balance can change as debt is repaid or additional amounts are added.

Amortization: The gradual repayment of a debt through scheduled payments that cover interest and reduce principal. Amortization separates each loan payment into interest and principal repayment.
Interest: The price paid for borrowing money or the income earned from lending or depositing it. Interest is the charge or return calculated in relation to principal, not the principal itself.
Mortgage: A loan secured by real estate, commonly repaid through scheduled payments over many years. Mortgage payments typically reduce principal while covering interest and sometimes other costs.
Accrued interest: Interest earned or owed over time but not yet paid or received. It can increase the amount due without being part of the original principal.
Compound interest: Interest calculated on an amount that includes previously accumulated interest. When unpaid interest is added to principal, later interest compounds on the larger balance.
Interest rate: A percentage that expresses the cost of borrowing or return on money over a specified period. The rate applies to principal to determine interest charges or earnings.
Bond: A debt security in which an issuer promises specified payments to investors. A bond generally promises repayment of its face amount, a principal sum, at maturity.
Loan origination fee: A charge imposed by a lender for processing and arranging a loan. This fee may be financed into a loan, but it is distinct from the amount borrowed for the borrower's use.
Loan payment: A sum paid by a borrower to a lender under a loan agreement. A loan payment may cover interest, reduce principal, or do both.
Loan: An agreement in which a lender provides money that a borrower must repay, usually with interest. Principal is the amount advanced under a loan before interest is counted.

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