Principal (Loan)
The original borrowed amount upon which any returns are calculated.
Detailed Description
Principal (Loan)
What is the principal amount in a loan?
The principal amount is the original sum of money borrowed or the amount of the loan that is still owed, excluding interest and fees.
How does the principal affect monthly loan payments?
The principal directly influences the size of the loan, which affects monthly payments; a larger principal leads to higher payments and more interest accrued.
What is the difference between principal and interest?
Principal is the actual amount borrowed, while interest is the cost of borrowing that amount, expressed as a percentage.
What is amortization in relation to principal?
Amortization is the process of gradually paying off a loan through scheduled payments, with each payment comprising both principal and interest.
How does refinancing affect the principal balance?
Refinancing can change the principal balance by allowing borrowers to pay down a portion of the loan or to access additional funds by increasing the principal.