Hovedstol

Hovedstol is a financial term used in Danish and Norwegian to denote the principal amount of a loan—the portion that represents the original borrowed sum and, in amortizing loans, the portion of the loan balance that remains to be repaid, excluding interest and fees. The hovedstol may refer to the initial borrowed amount or the current outstanding balance after repayments. In practice, lenders use the term to distinguish the amount that still needs to be repaid from the interest charged for borrowing.

In loan repayments, the hovedstol decreases as payments are made. Interest is calculated on the current hovedstol, while a portion of each payment reduces the hovedstol. For a fixed-rate loan with periodic interest rate i, number of payments n, and initial hovedstol P, the fixed payment A can be expressed as A = P * i * (1+i)^n / ((1+i)^n - 1). The interest portion in a given period t is I_t = P_{t-1} * i, and the principal repaid in that period is PR_t = A - I_t. The new hovedstol after period t is P_t = P_{t-1} - PR_t.

Uses and contexts: hovedstol is employed in consumer loans such as mortgages, car loans and student loans, as well as in corporate financing. It is distinct from interest (rente) and from any fees. Statements and amortization schedules typically show both the remaining hovedstol and the accrued interest, helping borrowers understand how much of their payments reduces debt versus interest.

In summary, hovedstol refers to the core debt amount of a loan—either the starting principal or the current outstanding balance—on which interest is calculated and principal repayments reduce over time.