loan principal
Also called: pokok utang
The amount of money borrowed before adding interest and other costs.
What it means
Loan principal is the amount of money borrowed before adding interest and other costs. This figure is the basis for calculating interest and remaining debt. Each installment usually consists of part principal and part interest.
Why it matters for families
Understanding the loan principal helps families know how much debt they actually have, not just the monthly installment. Focusing only on installments can make families forget that the remaining principal is still large early in the credit period. This matters when considering early repayment.
Example
For example, a family borrows Rp300 million for a house. The loan principal is Rp300 million, while the total payment over the credit period can be much larger because of interest. If they want to pay off early, what is calculated is the remaining principal plus applicable fees.
Common misunderstanding
Many think the loan principal is the same as the total debt that must be paid. In fact, the total payment includes principal plus interest and other costs.