What is the difference between principal and interest?
Published October 1, 2026 · 1 minute read
The answer
Principal repays the borrowed amount; interest is the cost charged for borrowing under the loan terms. A payment can include both, and may also include other items. Their accounting and tax treatment are not interchangeable.
For operating planning, use the full required cash payment. For accounting and tax questions, reconcile the lender statement and consult appropriate guidance rather than labeling every payment as an expense.
Further reading
These resources provide additional context. Check the official rules and documents that apply to your own situation.
This answer is general education. Apply it to the property's actual location, agreements, and circumstances. Where a decision requires professional advice, use a qualified adviser.
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