24 Hour Loans glossary of financial terms

Additional Principal Payment

This term is most commonly used within the borrowing sector for products such as mortgages and other types of loans. It is used to describe a situation that occurs when a borrower repays more money than they actually need to pay at any given time in order to reduce the total sum of the money that they owe to a lender.

By paying back more than the regular payment that is scheduled the borrower can basically cut down on the interest that will be charged over the course of their loan term. So, they will be able to repay the loan faster and will have to pay less in interest over the course of the loan. With some kinds of loans this kind of overpayment may not be possible or may incur extra charges, although it is now becoming more common for borrowers to be able to overpay in this way without penalty.