The dollar amount originally borrowed or financed on which interest is paid; also referred to as the 'face amount' of a loan.

The dollar amount originally borrowed or financed on which interest is paid; also referred to as the 'face amount' of a loan.

• A. Interest
• B. Collateral
• C. Principal
• D. Term

Answer: (C)

The amount you borrow upfront, on which interest is charged, is called the principal. It’s the face amount or loan amount — the original sum that gets financed. Interest is the cost you pay for borrowing that principal, calculated as a percentage of it over time. The other terms describe different parts of a loan: collateral is an asset pledged to secure the loan, the term is how long you have to repay, and the interest is the price of borrowing itself. So the correct concept here is the principal.

The amount you borrow upfront, on which interest is charged, is called the principal. It’s the face amount or loan amount — the original sum that gets financed. Interest is the cost you pay for borrowing that principal, calculated as a percentage of it over time. The other terms describe different parts of a loan: collateral is an asset pledged to secure the loan, the term is how long you have to repay, and the interest is the price of borrowing itself. So the correct concept here is the principal.