What Is a Principal Balance?

Loan amount (Principal) refers to the amount of funds borrowed by the borrower from the lender.

Loan principal

Right!

Loan amount (Principal) refers to

The principal of the loan does not include any costs (such as insurance premiums, evaluation fees, etc.) required to borrow money. These costs are attributable to the interest you pay

There are two ways to repay the loan principal, one-time repayment and

Difference from loan principal balance

Loan principal is sometimes confused to refer to the original loan principal and

Equal principal loan calculation formula:

Monthly repayment amount = (loan principal / number of repayment months) + (principal accumulated amount of returned principal) × monthly interest

For small loans and low interest rates:

Example: a loan of RMB 120,000, an annual interest rate of 4.86%, and a repayment period of 10 years

Equivalent principal and interest: repayment of 151,750.84 yuan after 10 years, total interest of 31,750.84 yuan

Equivalent principal: 149403.00 yuan repayment after 10 years, total interest 29403.00 yuan

The difference between the two: 2234.84 yuan / 10 years, only 235 yuan a year

Example: a loan of RMB 120,000, an annual interest rate of 4.86%, and a repayment period of 20 years

Equivalent principal and interest: repayment of 187,846.98 yuan after 20 years, total interest of 67,846.98 yuan

Equivalent principal: repayment of 178563.00 yuan after 20 years, total interest of 58563.00 yuan

The difference between the two: 9283.98 yuan / 20 years, only 465 yuan a year