1. What is Loan Interest Calculation?

The total interest calculation shows how much extra you'll pay beyond the principal amount when taking out a loan in Canada. It helps borrowers understand the true cost of borrowing.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( n \) — Number of payment periods
• \( PMT \) — Regular payment amount (CAD)
• \( P \) — Principal loan amount (CAD)

Explanation: This formula calculates the difference between all payments made over the life of the loan and the original amount borrowed.

3. Importance of Interest Calculation

Details: Understanding total interest helps Canadian borrowers compare loan options, plan finances, and make informed decisions about debt.

4. Using the Calculator

Tips: Enter the total number of payments, the payment amount in CAD, and the principal amount in CAD. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this work for all Canadian loans?
A: This provides a basic calculation. Some Canadian loans may have variable rates or fees that affect total interest.

Q2: How can I reduce total interest paid?
A: Make larger payments, choose shorter terms, or negotiate lower interest rates to reduce total interest.

Q3: Is this calculation before or after tax?
A: This shows pre-tax interest. In Canada, some loan interest may be tax-deductible (like mortgages).

Q4: Does this include compound interest?
A: No, this is a simple interest calculation. Most Canadian loans use compound interest.

Q5: What's typical interest for Canadian loans?
A: Rates vary by type: mortgages 3-6%, personal loans 5-30%, credit cards 19-25% typically.