Finance Glossary
Principal
The original sum of money borrowed, not including interest or fees. As you make repayments, a portion of each payment reduces the principal and the rest covers interest. At the start of a loan, a greater share of each payment typically goes toward interest; over time, more goes toward reducing the principal.
Example
If you borrow £1,000, that £1,000 is the principal. The £249 you pay in interest over the term is separate from the principal.
Related terms
Interest Rate
The percentage of the loan principal charged by a lender for…
Amortisation
The process of gradually paying off a loan through regular s…
Total Amount Repayable
The complete sum you will pay back over the life of a loan, …
Loan Term
The agreed length of time over which a loan must be fully re…
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