What refers to the original amount due in a loan?

The term that refers to the original amount due in a loan is known as the principal. The principal is the initial sum of money borrowed or the amount still owed on which the lender calculates interest. Understanding the principal is essential for borrowers because it influences the total interest paid over the life of the loan. It forms the basis upon which mortgage payments are calculated, excluding other costs such as interest or fees.

The other terms provided relate to different concepts in real estate and finance. A prepayment penalty refers to a fee charged to a borrower if they pay off their loan early. Police power pertains to the ability of the government to regulate behavior for the sake of public health, safety, and morals. Power of attorney is a legal document that allows one person to delegate authority to another to act on their behalf in legal or financial matters. Recognizing the specific meanings of these terms helps in distinguishing them from the principal, which is focused strictly on the loan amount itself.