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Because interest is calculated against the principal balance, paying down the principal in less time on your mortgage reduces the interest you'll pay. Even small additional principal payments can help.
A loan principal is the original amount of money borrowed via a loan. The loan will generate interest, and this will be added to the original amount. This is the basic way interest and loan repayment works, allowing borrowers to get the money they need and lenders to make a profit on the loans they offer.
The principal is the amount you borrowed and have to pay back, and interest is what the. For most borrowers, the total monthly payment you send to your mortgage company includes other things, such as homeowners insurance and taxes that may be held in an escrow account.
Borrower: The person who is borrowing money from a bank, money lender or financial institution. Typically, the borrower signs a contract and agrees to certain repayment terms. This person might also be known as the 'principal borrower', meaning the person who has borrowed the 'principal' or main loan amount.
The principal is the original loan amount not including any interest. For example, let's suppose you purchase a $350,000 home and put down $50,000 in cash. That means you're borrowing $300,000 of principal from the lender, which you'll need to pay back over the length of the loan.