Definition
The original loan amount borrowed, excluding interest, or in agency relationships, the person represented by an agent. Context is everything, because confusing the two can make closing statements deeply confusing.
Example Usage
Her monthly payment of $2,400 included $1,200 toward principal and $1,200 in interest, a ratio that slowly improved over time.
Origin
From Latin 'principalis' meaning chief or most important
Fun Fact
In the early years of a 30-year mortgage, you're paying mostly interest; by year 20, the ratio finally flips to favor principal reduction.
Source: Finance and real estate agency terminology
Related Terms
Translate This Term
See “principal” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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