Which term describes the borrowed amount in a loan payment schedule?

Which term describes the borrowed amount in a loan payment schedule?

• A. Principal
• B. Interest
• C. Fees
• D. Depreciation

Answer: (A)

The borrowed amount in a loan payment schedule is called the principal. It’s the original sum you receive from the lender before any payments are made, and it’s the amount that gets paid down over time. Each payment typically consists of two parts: interest on the remaining principal and a reduction of the principal itself, so you gradually owe less as you repay. If you hear terms like interest, those are the cost of borrowing; fees are extra charges that may be added; depreciation is the loss in value of an asset over time and isn’t part of the loan payment structure. So the principal is the amount you initially borrowed.

The borrowed amount in a loan payment schedule is called the principal. It’s the original sum you receive from the lender before any payments are made, and it’s the amount that gets paid down over time. Each payment typically consists of two parts: interest on the remaining principal and a reduction of the principal itself, so you gradually owe less as you repay. If you hear terms like interest, those are the cost of borrowing; fees are extra charges that may be added; depreciation is the loss in value of an asset over time and isn’t part of the loan payment structure. So the principal is the amount you initially borrowed.