principal

In agency law, a principal is a person or entity that authorizes another person or entity (known as an agent), to act on the principal’s behalf and subject to the principal’s control. The agent owes fiduciary duties to the principal, including duties of loyalty and care.

In the context finance, principal refers to the original amount of a debt or investment, excluding any interest, profits, or other additional earnings on the underlying amount generated over time. The repayment of principal reduces the underlying obligation, while interest represents either the cost of borrowing or the return on investment. Similarly, in trust law, principal also refers to the corpus of a trust, which is the property held in trust itself, and is distinct from the income or earnings produced by that property. 

The term principal may also refer to a person who bears primary responsibility for the performance of an obligation, as distinguished from a surety or guarantor who undertakes secondary liability.

[Last reviewed in January of 2026 by the Wex Definitions Team] 

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