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Definition
The outstanding principal (or outstanding balance) is the portion of the original loan you have not yet repaid. On a reducing-balance loan, each period’s interest is charged on this figure, so as it falls, your interest falls too. It is distinct from the total still to pay, which also includes future interest.
In plain terms
It is what you would owe if all future interest vanished — the pure debt remaining.
Why it matters for your company
Overpaying reduces the outstanding principal directly, cutting future interest. See overpayment and amortisation schedule.
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