As we kick off Yahoo Finance’s #SlayYourDebt month, let’s break down some of the big words that you’ll see when dealing with debt.
When you borrow money, the amount borrowed in the very beginning is the principal. It’s the base level of your loan before any interest, fees or penalties are added. In terms of student loans, if you’re the average class of 2017 graduate, you took out $39,400 to cover college, which means $39,400 would be your principal.
Sometimes, with large debts (like the $100,000 I owe), it can be hard to chip away at the principal because interest payments can be so high.
To think about it in credit card terms, you add to your principal every time you swipe your credit card. That $5 latte? It just added $5 to your principal.