1. What is the Personal Loan Payment Formula?

The personal loan payment formula calculates your fixed monthly payment based on principal amount, interest rate, loan term, and any origination fees. This is the standard formula used by Canadian lenders.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

• \( P \) — Principal amount (CAD)
• \( fees \) — Origination fees (CAD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of months
• \( PMT \) — Monthly payment (CAD)

Explanation: The formula accounts for compound interest over the loan term, with fees added to the principal.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and comparing loan offers. It shows the true cost of borrowing when fees are included.

4. Using the Calculator

Tips: Enter principal in CAD, fees in CAD, annual interest rate as a percentage, and term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Are Canadian loan rates compounded monthly?
A: Yes, most personal loans in Canada use monthly compounding interest.

Q2: How do fees affect the total cost?
A: Fees increase the total amount financed and therefore increase both monthly payments and total interest paid.

Q3: What's a typical loan term in Canada?
A: Personal loans typically range from 6-84 months (0.5-7 years) in Canada.

Q4: How can I reduce my total interest paid?
A: Choose a shorter term or make additional payments when possible.

Q5: Are there prepayment penalties in Canada?
A: Many Canadian lenders allow prepayment without penalty, but check your specific loan terms.