Principal
What Principal means
The original loan amount disbursed, or the outstanding balance yet to be repaid, excluding any accrued interest. Each EMI reduces the principal by a progressively increasing amount.
Example
On a ₹10 lakh personal loan, after 12 monthly EMIs of ₹22,244, the outstanding principal has reduced to approximately ₹8.22 lakh; the remaining ₹1.78 lakh was interest.
This definition is based on RBI – Compendium of Instructions on Retail Loans ↗. We link every figure to its primary source — see our data methodology.
Related repayment terms
- AmortisationThe gradual repayment of a loan through regular EMIs, where each payment covers the interest accrued for that period plus a slice of outstanding principal. Early EMIs are mostly interest; later EMIs are mostly principal.
- Amortisation ScheduleA month-by-month table showing how each EMI is split between interest and principal, along with the outstanding balance after every payment.
- Balloon PaymentA large lump-sum payment due at the end of a loan tenure, with smaller-than-normal EMIs during the repayment period. Common in vehicle and commercial loans.
- DisbursementThe actual release of sanctioned loan funds — to the borrower's bank account or directly to the seller, builder, or institution. Interest accrues from the disbursement date, not the sanction date.
- EMIA fixed monthly payment combining both the interest charges for the period and a portion of principal repayment, calculated so the outstanding balance reaches zero by the last instalment.
- ForeclosureFully closing a loan account before its scheduled maturity by paying off the entire outstanding principal in one lump sum. RBI prohibits foreclosure charges on floating-rate retail loans.