Glossary
Principal (balance)
The amount you actually owe on the loan, before interest and fees are added. Your balance is the principal still outstanding at any point in time.
By Leverage Finance · Updated 17 July 2026
Every repayment you make splits in two: part covers the interest charged since your last payment, and part reduces the principal. Early in a loan, more of each payment goes to interest; as the principal shrinks, more of each payment goes to paying it down. That shifting split is called amortisation.
When you refinance, it's the outstanding principal, plus any break fee and minus nothing else, that the new loan needs to cover. Your current lender can tell you the exact figure; it's called the payout figure.
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