pretty sure the word prince and principal are related and that it is most definitely a different word, i think in german it's prinzip, or synonym grundsatz, regel, or element

yes, principal in german is rektor or direktor, haupt- or das Kapital (yes that one), schulleiter

2

(of money) denoting an original sum invested or lent.

"the principal amount of your investment"

the words are closely related but different, and probably the confusion comes out of their close relation, a principle is essential, an element, a thing with controlling influence, but a principal is the ruler or king or basis or collateral

yes, and collateral literally means "from both sides" which implies that the principal is collateral meaning that it only can be released to the lender upon settlement of the contract, ie, it requires fulfillment of the contract