1. What is the Personal Loan Payment Formula?

The personal loan payment formula calculates the fixed monthly payment required to repay a loan over a specified term. It accounts for the principal amount, interest rate, and loan duration to determine consistent payments.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

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

Explanation: The formula calculates the fixed payment that covers both principal and interest each month, with more going toward interest early in the loan term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and comparing loan offers. It also shows the total cost of borrowing and helps assess affordability.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What's a typical personal loan interest rate in Canada?
A: Rates vary (6%-36%) based on credit score, lender, and loan terms. Good credit typically gets rates under 10%.

Q2: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total cost.

Q3: Are there other loan costs not included here?
A: This calculator doesn't account for origination fees, insurance, or prepayment penalties that some lenders charge.

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

Q5: How can I reduce my total interest paid?
A: Choose shorter terms, make extra payments when possible, or negotiate a lower interest rate with your lender.