Which term refers to the amount of money borrowed on a loan?

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Study for the GFL Financial Literacy Test. Dive into flashcards and multiple choice questions, each equipped with hints and explanations. Prepare thoroughly to excel in your exam!

Multiple Choice

Which term refers to the amount of money borrowed on a loan?

Explanation:
The amount borrowed on a loan is called the principal. When you take out a loan, the lender advances you a sum of money—the principal. You’ll repay that amount plus interest over time; the interest is the cost of borrowing. A deposit is money you put into an account, not the borrowed amount. A fee is an extra charge that may be added for processing or services, not the borrowed amount. The principal remains the base amount you must repay, separate from any interest or fees.

The amount borrowed on a loan is called the principal. When you take out a loan, the lender advances you a sum of money—the principal. You’ll repay that amount plus interest over time; the interest is the cost of borrowing. A deposit is money you put into an account, not the borrowed amount. A fee is an extra charge that may be added for processing or services, not the borrowed amount. The principal remains the base amount you must repay, separate from any interest or fees.

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