Business, Legal & Accounting Glossary
Principal is the amount of money you originally invest. Or, for something like a loan (e.g. a mortgage), it is the amount you still owe to the issuer of the loan (e.g. the bank).
If you’ve got principal, you can make money. Principal earns interest for its owner. For a savings account, the owner is the investor, and the bank pays interest to the investor. For a loan, the owner is the bank (or other entity), and the borrower pays interest.
In the case of a savings account, the principal grows as interest payments are added. In the case of a loan, the principal decreases until it reaches zero, at which point the loan is paid off.
Interest
Interest spread
Compound interest
Loan
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This glossary post was last updated: 29th November, 2021 | 0 Views.