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Finance & Banking vocabulary · Loans & Credit

Principal

Meaning in finance & banking, with examples

/ˈprɪnsəpəl/nounCore term

In finance & banking, principal means: The original amount of money borrowed or invested, not including interest. Each loan payment usually covers some interest and some principal.

In Turkish: anapara

How it is used

Used in loan agreements, payment plans and customer calls. People repay or pay down the principal; the outstanding principal is what is still owed. 'Principal and interest' is a fixed phrase.

Example sentences

  1. In the first years of a mortgage, most of each payment goes to interest, not principal.

  2. The customer wants to make an extra payment to reduce the principal.

Common collocations

  • repay the principal
  • outstanding principal
  • principal and interest
  • principal amount
  • loanMoney that a bank or another lender gives to a person or company, which must be paid back over time, usually with interest.
  • installmentOne of a series of regular payments used to repay a loan or to pay for something bought on credit.
  • interest rateThe price of borrowing money, shown as a percentage of the amount borrowed or saved for a period, usually one year.
  • outstandingNot yet paid or settled. An outstanding loan or invoice still has money owed on it.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Loans & Credit

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This page explains English vocabulary for learners. It is not financial advice.