Glossary · Financial Portfolio

What does principal mean?

Principal is the underlying amount borrowed or invested, separate from interest. On a loan statement, the outstanding principal is the part of that amount still unpaid.

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Plain English. Australian context.

Principal

Know what the term means, what it does not mean and where to go next.

Meaning & context

What it means for your records.

Plain-English information to help you organise your financial picture.

Financial Portfolio editorial team
Australian record-keeping context
Updated 7 October 2026

A simple example

If A$20,000 is borrowed and A$3,000 of principal has been repaid, A$17,000 of principal remains. Total payments may have been higher because some money went towards interest or fees.

What to keep in your records

Record the original borrowing separately from the latest outstanding balance. Keep the statement date and repayment type beside the loan, and use the current amount owed for a dated debt snapshot.

A common mix-up

A repayment is not necessarily all principal. The split between principal, interest and charges explains why the debt may fall by less than the amount paid. Read ASIC Moneysmart’s explanation.

Does an interest-only payment reduce principal?

Generally, an interest-only payment covers interest rather than reducing the amount borrowed. Extra principal repayments and charges must be checked against the actual statement.

Where can I check the meaning of principal?

Use the ASIC Moneysmart source alongside the relevant statement or product documents. The examples here explain the term; they do not recommend a financial product.

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