Definition & Meaning:

Basically, 'the principal' is the name that banks and lending institutions call the actual amount of money that a customer/borrower receives when they take out a loan. That's it.

For example, if you get a loan for $35,000, 'the principal' will be $35,000.

'The principal' does not include the interest or fees you will have to pay the bank or lending institution for getting a loan from them. For example, on a loan of $35,000, when you add interest and fees, you will probably repay the bank $40,000 for the loan.

To see how much money you will actually have to pay back for a loan, you should look at the loan's 'Annual Percentage Rate (APR)' or ask the bank.

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Related Vocabulary:

Preferential Interest Rate, Redemption Penalties, Annual Percentage Rate.

To learn more vocabulary connected to loans, you can do a free online exercise on bank loan vocabulary.