Principal
Principles of Finance glossary · Time Value of Money
Definition
The face amount of debt; also, in finance, the main amount invested.
Principal in plain English
Principal is the core amount of money in a deal, before any interest is added on top. If you borrow $1,000, that $1,000 is the principal — the actual sum you owe, separate from the extra interest you pay for the privilege of borrowing. It works the same way when you're the one lending or investing: the principal is the original chunk you put in, and any returns grow on top of it. Simple rule of thumb: principal is the "real" money moved; interest is the rental fee charged on it.
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