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 Bullish Reasons to Buy Danaher Corporation (DHR) Stock
- Stratasys, Ltd. Q4 and 2014 Earnings: Market Relieved, No Major Surprises
- Smart Investing Advice From "Downton Abbey" (Really!)
- Net Neutrality Is Here, and 75% of Americans Don't Know What It Is
- 3 Stocks That Could Lose You a Lot of Money
- Should You Use Stop-Losses? Why or Why Not?