What do "principal" and "simple interest" mean in a car loan?

What do "principal" and "simple interest" mean in a car loan?

James Bell (Publisher, Auto Reviewer) gives expert video advice on: What does "balloon payment" mean?; What does "base value" mean"?; What does "buy here, pay here" financing mean? and more...

The principal is the actual amount that you borrowed. So, in the case of buying a vehicle, if the vehicle price is $20,000, your loan then is written for $20,000 plus any interest. Before you add that interest, that base amount is the principal. Looking at the car loan, it's quite simple. You consider how much you're borrowing up front, take the interest rate and apply it over the months before you pay the loan off.