What are "principal" and "interest"?

What are "principal" and "interest"?

Mitchell Freedman, CPA/PFS (CEO, MFAC Financial Advisors) gives expert video advice on: Where can I get a loan?; Are credit union loan rates always lower than bank loan rates?; How can I borrow money to buy a car? and more...

In a loan transaction, there are two components in the repayment. Part of it is principal, which is a portion of the original amount of the loan that is given to you. The other part is interest, which is the compensation that the borrower pays to the lender for the use of the money.