If you've got principal, you can make money. Principal earns interest for its owner. For a savings account, the owner is the investor, and the bank pays interest to the investor. For a loan, the owner is the bank (or other entity), and the borrower pays interest.
In the case of a savings account, the principal grows as interest payments are added. In the case of a loan, the principal decreases until it reaches zero, at which point the loan is paid off.
Related Fool Articles
Related Community Blogs
Recent Mentions on Fool.com
- 5 Things salesforce.com's Management Wants You to Know
- All?s Fair in Love and War and Oil
- Is It Time to Buy McKesson Corporation Stock?
- 3 Reasons Groupon's Stock Could Fall
- 3 Ways "Work Martyr" Culture Hurts Everyone, and 3 Ways Companies Are Changing It
- 5 Things Danaher Corp.'s Management Wants You to Know