1. A person or firm employing another to act as their agent. A person using an estate agent to sell a house, for example, is a principal; the estate agent is the agent. The principal–agent problem is concerned with how agents can be induced to act in the interests of the principal rather than their own.

2. The amount of money borrowed at the start of a loan. The borrower is obligated to pay interest on the loan and eventually to repay the principal.