Principal

Principal typically refers to the original sum of money invested or loaned, before any earnings, interest, or returns are added. In investing, the principal is the amount you put into purchasing an asset, which means it’s also the money you risk losing or using to try to make a profit.

When it comes to loans or bonds, the principal is the amount borrowed—not including any interest owed. For example, with a bond, the principal is usually the bond’s issue price, while with loans, it’s the original borrowed amount that gets repaid over time.

In the context of surety bonds, the principal is the individual or business that obtains the bond, assuring others they will fulfill a specific commitment. Additionally, in business, "principal" may refer to an owner or top executive, such as the CEO of a company or a partner in a firm.

Understanding what "principal" means is essential, since it represents the core funds at risk or owed in a financial transaction.