Glossary
Glossary of terms and acronyms related to Australian banking, finance and investments.
Principal
Principal is the actual amount borrowed on a loan without the interest, ongoing fees, and other expenses that make up the loan's total cost. In some cases it also refers to the amount that is left unpaid, rather than the initial debt. Interest is calculated as a percentage of the remaining principal; each repayment you make is counted against the principal and thus decreases the interest you owe. In certain loans, the listed principal is greater than the amount loaned to the borrower, creating the same economic effect as a higher interest rate.
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