Plain-English definitions for the terms you'll encounter on your financial journey.
The process of gradually paying off a debt over time through regular payments of principal and interest.
A detailed table of periodic loan payments, showing the amount of principal and the amount of interest that comprise each payment.
Unpaid interest that is added to the principal balance of a student loan, increasing the total amount on which future interest is calculated.
Interest calculated on both the initial principal and the accumulated interest from previous periods.
The possibility that a borrower or bond issuer will be unable to make their required interest or principal payments.
A financial agreement where two parties exchange the principal and interest payments of a loan in one currency for those in another currency. It is often used by companies to reduce borrowing costs or manage exposure to exchange rate fluctuations.
An insurance contract that pays interest based on the performance of a market index while protecting the principal from market losses.
The process where unpaid interest is added to the principal balance of a loan, which then increases the total amount owed.
A loan where the borrower is only required to pay the interest for a certain period, after which they must begin paying down the principal.
The date on which the principal amount of a note or bond becomes due.
A situation where the monthly loan payment is less than the interest due, causing the unpaid interest to be added to the principal balance.
An acronym for Principal, Interest, Taxes, and Insurance, which are the four main components of a monthly mortgage payment. It represents the total periodic cost of owning a home under a mortgage.
The original sum of money borrowed in a loan or the amount put into an investment, separate from interest.