What is the difference between the principal amount on a loan and the interest amount on a loan?

The principal amount on a loan refers to the original sum of money borrowed in a loan. It is the amount on which the lender bases the interest to be paid.

Interest on a loan, on the other hand, is the cost of borrowing the principal amount and is determined by the interest rate. It is essentially the fee you pay to the lender for using their money.

So, the main difference between the two is that the principal amount is the original amount borrowed, while the interest is the cost of borrowing that money. The total repayment of a loan consists of the principal amount plus the accumulated interest.