Definition:
The principal of a loan is the amount borrowed. Interest is calculated on the principal. In a loan amortization schedule, the principal and interest are separated, so you can see which part of your monthly payment goes to paying off the principal, and which part is used to pay interest. An "interest only" loan payment does not draw down (reduce) the principal.
Common Misspellings: Principal and principle are sometimes confused. A "principle" is a belief or standard.
Examples:
If you get a business loan for $100,000, this is the principal amount.
