In a loan, what is the principal?
AnswerThe original amount borrowed
Interest is charged on the principal.
Money · Facts & stats
Loan facts & stats
8 fact-checked facts about how loans work, from principal to interest, each with the reason behind it. 4 more are in today's round and join this page after it closes.
The basics
What is interest on a loan?
AnswerThe cost of borrowing money
Borrowers pay interest in exchange for using the lender's money.
Going deeper
What does APR stand for?
AnswerAnnual percentage rate
APR shows the yearly cost of borrowing, including certain fees.
What is amortization?
AnswerPaying off a loan through scheduled installments
Each payment covers interest and part of the principal.
What is the formula for simple interest?
AnswerPrincipal x rate x time
Simple interest is I = P x r x t.
Muhammad Yunus founded which microcredit bank?
AnswerGrameen Bank
Grameen Bank in Bangladesh made small loans to people without collateral.
Expert level
In what year did Yunus and Grameen Bank share the Nobel Peace Prize?
Answer2006
They were honored in 2006 for their microcredit work.
What is the simple interest on $1,000 at 5% per year for 3 years?
Answer$150
1,000 x 0.05 x 3 = 150; $157.63 would be compound interest.
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