by John Darer® CLU ChFC MSSC RSP CLTC
Principle and Principal may sound the same but each word has a distinctly different meaning.
The terms are often confused by consumers and made worse by financial types who don't get it right. For example, the Attorney Finance Blog* of a company that lends money to trial lawyers, that also "moonlights" in settlement planning industry, including structured settlement advice to attorneys:
- "No principle payment until the underlying case is resolved.
- The firm is not required to make any principle payments until a case is resolved. Traditional banks require periodic repayment of principle balances." November 18, 2009
- "With most legal finance providers, No principle payments are required on the money until final disposition of the case, either through settlement or adjudication". October 5, 2009
"Principle" is a noun meaning rule, standard of law, guideline or doctrine. The above paragraph read literally could mean " No rules or standards until the underlying case is resolved"
"Principal" can either be noun or an adjective. In finance it means a sum of borrowed money (distinct from interest). If you make a mortgage payment on a conventional 30 year mortgage, part of your payment goes toward repayment of the amount you borrowed (i.e. principal) and part goes to interest on the amount you borrowed.
Is one's claim to be a "financial expert" valid when one does not display an understanding of the fundamentals?
* current as of February 6, 2010 830am EST