Definition
The outstanding balance of a loan, excluding interest, or the portion of a payment that reduces that balance.
Example
Of the $2,430 payment, $412 went to principal and $2,018 to interest in month six.
Related terms
- Acceleration Clause
- Accrued Interest
- Adjustable Rate Cap
- Adjustable-Rate Mortgage
- Amortization
- Annual Percentage Rate
Frequently asked questions
What does Principal mean in real estate?
The outstanding balance of a loan, excluding interest, or the portion of a payment that reduces that balance.
How is Principal used in practice?
Of the $2,430 payment, $412 went to principal and $2,018 to interest in month six.
This definition is provided for educational purposes. Legal and tax terminology can carry jurisdiction-specific meaning — confirm with a licensed professional before relying on it in a transaction.