1. What is Loan Amortization?

Loan amortization is the process of paying off a debt over time through regular payments. Each payment covers both interest charges and repayment of principal, with the interest portion decreasing over time while the principal portion increases.

2. How Does the Calculator Work?

The calculator uses the standard amortization formula:

Where:

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

Explanation: The formula calculates the fixed monthly payment required to fully repay a loan over its term, accounting for compound interest.

3. Importance of Loan Calculation

Details: Understanding your loan payments helps with budgeting and financial planning. It shows the true cost of borrowing and helps compare different loan options.

4. Using the Calculator

Tips: Enter the principal amount in CAD, annual interest rate as a percentage (e.g., 5.25 for 5.25%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Are Alberta loan rates different from other provinces?
A: Interest rates are generally consistent across Canada, but provincial regulations on lending practices may vary.

Q2: What's a typical personal loan term in Alberta?
A: Personal loans typically range from 1-7 years, though some lenders may offer terms up to 10 years.

Q3: Does this include Alberta's insurance or fees?
A: This calculates principal and interest only. Additional fees or insurance would increase your total cost.

Q4: How does compounding frequency affect payments?
A: Most Canadian loans use monthly compounding, which this calculator assumes. Different compounding would change results.

Q5: Are there prepayment options in Alberta?
A: Many Alberta lenders allow prepayment, but terms vary. Check your loan agreement for prepayment penalties or privileges.