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About: Principal balance     Goto   Sponge   NotDistinct   Permalink

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The principal balance, in regard to a mortgage or other instrument of debt, is the amount due and owed to satisfy the payoff of an underlying obligation, sans interest or other charges. Amortized mortgage loans automatically pay a portion of each monthly payment to the principal balance, with the rest being paid as interest. An interest-only loan doesn't require any money to be paid toward the principal balance each month, but such payment is allowable.