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
- Worried About The Market Correction? History Says You Shouldn't Be
- Splunk, Inc. Spikes on an Impressive Quarterly Beat
- Market's Manic Monday; Or, How I Learned to Stop Worrying and Love Long-Term Investing
- What Is Larry Page's Net Worth?
- 7 Reasons Buying a Home Now Is a Smart Move