ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In the context of borrowing, principal is the initial size of a loan-it can also be the amount still owed on a loan. If you take out a $50, 000 mortgage, for example, the principal is $50, 000. If you pay off $30, 000, the principal balance now consists of the remaining $20, 000.

Detailed explanation-2: -The principal is the amount of funding borrowed for your home loan, and the interest is the money paid monthly for use of the loan. Understanding both principal and interest can help you choose the best mortgage option for you.

Detailed explanation-3: -The principal–the money that you borrow. The interest–this is like paying rent on the money you borrow.

Detailed explanation-4: -The principal is the amount borrowed, while the interest is the fee paid to borrow the money. Consider an individual who saved $400, 000 to pay for a $1, 000, 000 home. They would need to borrow $600, 000 from the bank to complete the transaction. The $600, 000 is the principal amount – the money borrowed.

Detailed explanation-5: -The amount of money borrowed from the bank is called the loan, and the extra amount of money paid back to the bank other than the loan is called the interest.