Principal
Definition
The original sum borrowed or invested, before interest.Principal is the original amount of a loan or deposit, separate from the interest. In a loan, each EMI reduces the outstanding principal; in a deposit, interest is calculated on the principal (and, with compounding, on accumulated interest too).
Related guides
Related terms
- EMI (Equated Monthly Instalment) — A fixed monthly payment that repays a loan's principal and interest over its tenure.
- Compound Interest — Interest calculated on both the principal and previously accumulated interest.
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