Financial literacy guide

Borrowing basics: principal, interest, fees and term

The cost of borrowing depends on the amount borrowed, interest rate, fees, payment structure and how long the balance remains outstanding.

BorrowingLoan basics

Editorial review: August 11, 2026 · Lauren M. Whitfield

Principal

Principal is the amount borrowed before interest and fees.

Interest and fees

Two loans with the same headline rate can have different total costs when fees and compounding differ.

Term

Longer repayment can reduce an individual payment while increasing the number of interest periods.

Read the agreement

Payment timing, variable-rate rules, penalties and collateral terms can materially affect risk.

Educational information only. Use current product terms and the rules that apply in your country. For decisions with significant financial consequences, consider an appropriately qualified professional.