Principal
The original amount borrowed on a loan, not including interest or fees. Each loan payment typically covers interest first, with any remaining amount applied to the principal. Paying extra toward the principal reduces the loan balance faster and results in less interest paid overall.
Related guides
- Full credit & FICO® glossary
Browse all defined terms by category.
- Installment Loan
A loan repaid in fixed monthly payments (installments) over a set period of time. Examples include mortgages, auto loans, student loans, and personal loans. Unlike revolving credit, installment loans have a fixed balance that decreases with each payment.
- Interest Rate
The percentage charged by a lender for borrowing money, expressed annually. The interest rate is the base cost of borrowing. APR (Annual Percentage Rate) is a broader measure that includes fees in addition to the interest rate.
Frequently Asked Questions About Principal
What does Principal mean?
The original amount borrowed on a loan, not including interest or fees. Each loan payment typically covers interest first, with any remaining amount applied to the principal. Paying extra toward the principal reduces the loan balance faster and results in less interest paid overall.
Is Principal important for my FICO® score?
Understanding Principal helps you manage your credit profile more effectively, which in turn supports a stronger FICO® score.