If a farmer pays off a loan in full, the portion of the payment that represents the original amount borrowed is called what?

If a farmer pays off a loan in full, the portion of the payment that represents the original amount borrowed is called what?

• A. Interest
• B. Principal
• C. Fees
• D. Rent

Answer: (B)

The amount you originally borrowed is the principal. When you repay a loan, each payment typically includes two parts: paying down the principal (the original loan amount) and paying interest (the cost of borrowing). If you pay the loan off in full, you’re settling the remaining principal plus any interest due, but the portion that comes from the original borrowed amount is the principal. The other terms don’t fit: interest is the charge for borrowing, fees are extra charges, and rent isn’t used to describe loan amounts.

The amount you originally borrowed is the principal. When you repay a loan, each payment typically includes two parts: paying down the principal (the original loan amount) and paying interest (the cost of borrowing). If you pay the loan off in full, you’re settling the remaining principal plus any interest due, but the portion that comes from the original borrowed amount is the principal. The other terms don’t fit: interest is the charge for borrowing, fees are extra charges, and rent isn’t used to describe loan amounts.