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 the principal amount. This calculator helps you understand your monthly payments and total loan cost for personal loans in Ontario, Canada.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — 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 compound interest over the life of the loan, calculating a fixed payment amount that pays off the loan by the end of the term.

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 offers.

4. Using the Calculator

Tips: Enter the loan amount in CAD, annual interest rate (without % sign), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical personal loan interest rate in Ontario?
A: Rates vary but typically range from 5% to 36% APR depending on credit score, loan amount, and term.

Q2: Are there additional fees not included in this calculation?
A: Some lenders charge origination fees or other costs. Check with your lender for complete cost details.

Q3: How does making extra payments affect my loan?
A: Extra payments reduce principal faster, saving interest and potentially shortening the loan term.

Q4: What's the difference between fixed and variable rate loans?
A: Fixed rates stay the same; variable rates can change with market conditions. This calculator assumes fixed rates.

Q5: Are personal loan interest payments tax deductible in Canada?
A: Generally no, unless the loan is used for income-producing investments or business purposes.