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Loan Calculator Canada With Extra Payments Monthly

Canadian Loan Payment Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

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years
CAD

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1. What is the Canadian Loan Payment Formula?

The standard Canadian loan payment formula calculates the fixed monthly payment required to fully amortize a loan over its term, including both principal and interest components.

2. How Does the Calculator Work?

The calculator uses the standard amortization formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

Extra Payments: The calculator then applies your additional monthly payment to reduce the principal faster, recalculating the amortization schedule accordingly.

3. Importance of Extra Payments

Details: Making extra payments directly reduces your principal balance, which decreases the total interest paid over the life of the loan and can significantly shorten your loan term.

4. Using the Calculator

Tips: Enter the principal amount in CAD, annual interest rate as a percentage, loan term in years, and any additional monthly payment you plan to make. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do extra payments affect my loan?
A: Extra payments reduce your principal faster, saving interest and shortening your loan term. Even small extra payments can make a big difference over time.

Q2: Are there prepayment penalties in Canada?
A: Some Canadian mortgages have prepayment penalties. Check your loan agreement before making large extra payments.

Q3: Should I pay extra principal or invest?
A: This depends on your loan interest rate vs. expected investment returns. Generally, paying down high-interest debt first makes sense.

Q4: How often should I make extra payments?
A: Monthly extra payments have the greatest impact, but even annual lump sums can help reduce your principal.

Q5: Can I change my extra payment amount later?
A: Yes, most Canadian lenders allow you to adjust or stop extra payments at any time without penalty.

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