Difference Between Outstanding Balance & Principal

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"Outstanding balance" and "principal" are two different things and should always be looked at as such. Learn the difference between outstanding balance and principle with help from a business consultant and marketing expert in this free video clip.

Part of the Video Series: Taxes & Unemployment
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Video Transcript

Hi, I'm Isaac Rodriguez. I'm a business consultant. I'm going to talk to you a little about the difference between outstanding balance and principal. The outstanding balance, we are talking about loans right now. Outstanding balance can be different than the principal amount. The principal amount was the original amount that you borrowed when you first took out the loan. Let's say it's 100 dollars, and then you have plus interest, and those payments will be made over whatever period of time it is that you agreed upon in your loan documents. Now, if you decide to pay off this loan in the middle of the month, then you may have some accrued interest, and if you have accrued interest, and you want to pay off the loan, your outstanding balance is going to be different than the principal amount that your originally borrowed - certainly, because it'll be less based upon the payments that you've made, and also the additional interest that it is that you owe for that particular period of time. And, that's the difference between outstanding balance and principal. I'm Isaac Rodriguez.

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