Additional Principal Payment
- The word "Principal" in this case refers to the remaining balance of a loan excluding interest charges.
- You can pay extra money in addition to your required loan payment to help pay off the principal loan amount faster. By making the extra payment, you also reduce the amount of interest paid.
deposit, pre-payment, accelerated payment, pay-off, lump-sum
Related Terms and Acronyms
- Amortization — Definition,
- Amortization refers to the process of gradually paying down the principal of a loan. Each payment toward the principal reduces your loan by that amount. This is different than an interest-only loan payment where the principal balance is never reduced. Amortization for a mortgage loan in Canada is normally 25 years, but can be as few as 5 years.
- Biweekly Accelerated Payment — Definition,
- A mortgage that schedules payments every two weeks instead of the standard monthly payment. The 26 biweekly payments are each equal to one-half of the monthly payment. The result for the borrower is a substantial reduction in interest payments because the mortgage is paid off sooner.
- Lump Sum Payment — Definition,
- One-time single-sum payment or payout.
- An extra payment made to reduce a loan.
- Pre-payment — Definition,
- Applying additional payments towards the balance of a mortgage loan.
- Pre-payment Clause — Definition,
- A clause that stipulates the amount of principal a borrower may prepay ahead of schedule without penalty as well as the prepayment penalty for larger prepayments.
- Pre-payment Penalty — Definition,
- A lender's charge to the borrower for paying off the loan before the end of the term.
- Principal — Definition,
- The original balance of money lent on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.
- Principal and Interest (P&I, PI) — Acronym,
- Acronym for the elements of a mortgage payment: principal and interest.