The total amount of money borrowed (or invested), not including any interest or dividends.It is the original investment.

For example: James bought a sports car for $50,000. He had to sign an agreement saying that if he can pay the amount within a year, he does not need to pay any interest. This $50,000 is the principal amount.

In the context of borrowing, principal refers to the initial size of a loan; it can also mean the amount still owed on a loan. If you take out a $50,000 mortgage for example, the principal is $50,000. If you pay off $30,000, the remaining $20,000 left to repay is also called the principal.

Recall what are types of interest

Simple interest

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Compound interest

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