1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to repay a loan over a specified term at a given interest rate. This is the standard formula used for Government of Canada loan programs.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

• \( P \) — Principal loan amount (CAD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)

Explanation: The formula accounts for both principal repayment and interest charges over the loan term, calculating a fixed payment amount that remains the same throughout the loan period.

3. Importance of Loan Calculation

Details: Accurate loan payment calculation helps borrowers understand their financial commitments, compare loan options, and plan their budgets effectively for Government of Canada loan programs.

4. Using the Calculator

Tips: Enter principal amount in CAD, annual interest rate in percentage, and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What types of loans does this calculator work for?
A: This calculator works for fixed-rate, fully amortizing loans offered through Government of Canada programs.

Q2: Does this include insurance or other fees?
A: No, this calculates only the principal and interest payment. Additional fees would increase the total cost.

Q3: How does changing the term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms increase payments but reduce total interest.

Q4: Are there prepayment options in Canada?
A: Many Government of Canada loans allow prepayment without penalty, but check specific program terms.

Q5: What's the difference between nominal and effective rates?
A: The calculator uses nominal rates. Effective rates account for compounding and may be slightly higher.