Back to Glossary
Principal Payment
January 19, 2023
The principal payment is essentially a payment that goes toward repaying the original amount of money borrowed in a loan. On the other hand, interest is a cost you pay to borrow money that is often calculated as a percentage of the loan's yearly value. As a result, when you make a principal payment, you reduce the amount of loan you must repay but not the amount of interest charged on that loan.
Related Topics
When Is the First Mortgage Payment Due?
What Does Foreclosure Mean?
What Is a HELOC Loan?
Loan Default
Financial Considerations (For First-Time Home Buyers)
Mortgage Loan Types
Payment and Debt Ratios
Home Value: Appraised, Estimated, Actual