What is a Principal in Math? Definition and Examples

A principal in math or especially finance is the amount of money borrowed or invested on which interest is calculated.

Loan principal

Example #1

You go to a local bank to borrow money.

Loan amount: 35,000

Total amount you pay after 60 months: 39,629.59

Total interest you after 60 months: 4,629.59

Total cost after 60 months: 42,079.59

The principal is 35,000 since this is the amount you borrowed from the bank.

Principal of an investment

Example #2

You go to a local bank and make a deposit.

Deposit : 80,000

Annual interest rate: 3.875

Total interest you receive after 1 year: 3,155.65

The principal is 80,000 since this is the amount you invested

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