“My monthly payment is $1,200 of principal — no fee at all.”
Usage Entry 1110 / 1350 60-second read
Principal vs. Interest
The loan amount versus the fee charged for borrowing it.
The comparisoni
“My monthly payment is $1,200: principal (the original loan) plus interest (the fee for borrowing).”
The ruleii
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PRINCIPAL = loan amount. INTEREST = fee.
In a loan, PRINCIPAL is the original amount borrowed. INTEREST is the additional fee charged for borrowing it. Early payments are mostly interest; later ones pay down more principal.
Memory aidiii
Remember it like this
Principal shrinks the loan. Interest feeds the lender.