LENDING GLOSSARY
Principal
Principal
The amount borrowed or the unpaid balance excluding interest and fees.
What does Principal mean?
The amount borrowed or the unpaid balance excluding interest and fees. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Principal in context
After repaying $50,000 on a $500,000 loan, principal may be $450,000.
Why it matters in financing
Principal can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related lending terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.