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
- 20 Stocks With Monthly Dividends: Chatham Lodging Trust
- Is It Time to Buy Parker-Hannifin Corporation Stock?
- 3 Tech Stocks With Massive Upside Potential
- Silicon Laboratories Earnings: Stock Soars on Classic Beat-and-Raise Report
- NXP Semiconductors NV Keeps Delivering for Its Long-Term Shareholders
- Why Silicon Laboratories Shares Soared Today