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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Principal

Definition:

The original amount of money you put down for a deposit or investment.

The higher the principal, the more you will pay in interest on a loan or the more potential returns you could get on an investment.

Example

You borrow $10,000 to buy a car. You pay off the loan in two years, and your total payments are $15,000. That means that in addition to the principal of the loan ($10,000), you’ve paid $5,000 in interest.