Saving & borrowing2 min read
Principal repaymentGerman: Tilgung
Principal repayment is paying back the amount borrowed on a loan. It is separate from interest payments.
In plain language
A payment may contain both interest and principal. The principal portion reduces the outstanding balance. With a fixed-rate amortising loan and constant payments, the principal portion increases over time.
Let’s make it concrete
Of a €600 payment, €200 is interest and €400 repays principal. Your remaining loan balance falls by €400.
Simplified example for illustration.Worth understanding
Not all of the monthly payment reduces debt. Interest and possible fees must be considered separately.
Read more from official sources
For further learning and reference:
Financial education for orientation. No individual investment, tax or legal advice.
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