Principal — Financial Glossary
Definition: The original amount of money borrowed in a loan, not including interest or fees.
What is principal?
Principal is the original sum of money borrowed in a loan. When you make monthly payments, a portion goes toward reducing the principal and a portion goes toward interest.
Principal vs. interest
In the early years of a loan, most of your payment goes toward interest. As the principal decreases over time, more of each payment is applied to the principal. This is the concept of amortization.