Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. The response format is open.

What does bank do with “Repaid Principal”? 
Does it add to their lending reserves or is it utilized in other ways? It depends on how the economy and the bank in particular are doing. To simplify things greatly, banks get deposits and lend (or otherwise invest) the majority of those deposits. They must keep some percentage in reserve in case depositors want to make withdrawals, and if they get a high percentage of withdrawals (pushing them to be undercapitalized) then they may sell their loans to other banks. Whether they lend the money to someone else or use the money for something else will depend completely on how many reserves they have from depositors and whether they have people lined up to take profitable loans from them. I wrote this answer for the benefit of CQM, I'd vote to close this question if I had 49 more reputation points, since it's not really about personal finance.