In the context of borrowing, principal is the initial size of a loan or a bond the amount the bond issuer must repay. In the context of investing, principal is the original sum committed to the purchase of assets—independent of any earnings or interest. In contracts and contractural ventures, principals are the chief parties involved in the transaction who have rights, duties, and obligations regarding it. The Various Definitions of Principal Different Types of Principal Definition Loans The sum of money borrowed Investments The amount of money put into an investment Bonds The face value of a bond Companies The owner of a private company, partnership, or other type of firm Transactions The party that has the power to transact on behalf of an organization or account and takes on the attendant risk, whether it be an individual, a corporation, a partnership, a government agency, or a nonprofit organization.
Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.
We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear.
Investopedia does not include all offers available in the marketplace. Related Terms What Is a Bond? A bond is a fixed-income investment that represents a loan made by an investor to a borrower, ususally corporate or governmental. Agency Theory Agency theory is an economic principle used to explain disputes between principals and agents.
What Does Nominal Mean and How Does it Compare to Real Rates Nominal is a common financial term with several different contexts, referring to something small, an unadjusted rate, or the face value of an asset. Average Life Average life is the length of time the principal of a debt issue is expected to be outstanding. The average life is an average period before a debt is repaid through amortization or sinking fund payments.
Accrued Interest Definition Accrued interest refers to the interest that has been incurred on a loan or other financial obligation but has not yet been paid out. Accrual Rate Accrual rate refers to the rate of interest that is added to the principal of a financial instrument between cash payments of that interest.
Partner Links. Related Articles. Bonds How to Give Bonds as a Gift. Loan Basics Loan vs. Line of Credit: What's the Difference? Investopedia is part of the Dotdash publishing family. The amount quoted by the lender to pay off the loan is essentially an updated loan balance. The lender will add to the statement balance all unpaid interest accrued between the statement date and the intended payoff date, plus any payoff fees prescribed in the loan terms such as a prepayment penalty.
The payoff balance on a loan will always be higher than the statement balance. But interest continues to accrue each day after that date. The lender will want to collect every penny in interest due to him right up to the day you pay off the loan.
Your lender will quote a payoff balance as of a specific date, but it will continue to add interest to your principal until the day your payment actually reaches their processing center. Because your lender more than likely allows for electronic payments, it should post quickly.
However, if your payment is late for any reason, such as a postal delay if you mailed it, you may find you owe a few days of residual interest.
The lender will bill you for the amount you still owe plus a late fee. To avoid this problem, allow for a few days of payment delay when you set the effective date for your payoff.
If your payment arrives prior to the effective payoff date, the lender will refund the excess interest you paid via a check or account credit. Just remember to add a few days to the closing date so that you have allowed for a cushion. But for most estimates, using this trick will suffice: take your principal balance and add to it a monthly payment.
Assuming that you are on time with your payments, this number should always be a bit higher than your actual payoff, but at least this way you will be overestimating instead of underestimating, which is typically the case when you use the principal balance as the payoff amount. Therefore, interest is always owed through the end of the month.
However, to calculate an estimated payoff, the same concept applies: take the principal balance and add a monthly mortgage payment to obtain an estimated payoff.
How long should it take to get a payoff amount from a lender? Can the figure be calculated over the phone and be given right then? Is this time frame common or should that figure be calculated fairly quickly? I had someone tell me that and I called again, talked to a different branch, and got the papers within two hours.
0コメント