U.S. Mortgage Index

Principal

Definition

Principal is the unpaid amount of the loan itself—the debt remaining, not the interest charged for using that money.

In plain English

A payment can split between interest and principal. Principal is the remaining borrowed amount. Paying principal down reduces what is still owed; paying interest does not, by itself, shrink that remaining amount. Unpaid principal balance is a servicing phrase for the same idea. This page is the consumer amount, not a Guide formula.

Technical definition

Consumer glossaries treat principal as the loan amount still owed. Interest is the cost of borrowing that amount. They are related and easy to mix.

Why it matters

Payoff quotes, amortization, and extra payments all act on principal. Confusing it with interest misreads those figures.

Example

Taylor’s monthly payment covers accrued interest first. The rest reduces principal. After the payment, the remaining debt is the new principal.

Commonly confused with

Sources reviewed