There's something of a US/UK divide on this one. Check out this NGram for spend the capital / spend the principal, and toggle the corpus between American and British. US usage is about equal for both - but the UK clearly favours capital, which accords with my own gut feel.
I think those particular search terms are appropriate here. Consider a person with no income, who lives entirely on savings. Certainly in British English, if they have sufficient savings (and interest rates are high enough) they will aspire to live entirely on the monthly interest, and not spend the capital. On the other side of the coin, if you have a mortgage, and can afford to do so, you'll often be advised to make a capital repayment, thus reducing the amount of all future payments which will be simply swallowed up by the monthly interest charge.