principal and interest

Principal and interest are two components of a loan payment:

1. **Principal**: The principal is the original amount of money borrowed or the outstanding balance of the loan. It represents the amount of money that the borrower initially receives from the lender. With each loan payment, a portion of the payment goes towards reducing the principal balance.

2. **Interest**: Interest is the cost of borrowing money. It is the additional amount paid by the borrower to the lender in exchange for the privilege of using the lender's funds. The interest is typically calculated as a percentage of the outstanding principal balance and is included in each loan payment. The portion of the payment allocated to interest decreases over time as the principal balance decreases.

Together, the principal and interest make up the total loan payment that the borrower is required to make on a regular basis until the loan is fully repaid.