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's used to compare loan offers from different Canadian lenders.

2. How Does the Calculator Work?

The calculator uses the PMT formula:

Where:

• \( P \) — Principal loan amount (CAD)
• \( r \) — Monthly interest rate (annual rate ÷ 12 ÷ 100)
• \( n \) — Number of monthly payments
• \( PMT \) — Monthly payment amount (CAD)

Explanation: The formula accounts for compound interest and spreads payments evenly over the loan term.

3. Importance of Loan Payment Calculation

Details: Calculating monthly payments helps borrowers compare loan offers, budget effectively, and understand the total cost of borrowing in Canada.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: How accurate are these calculations?
A: The calculations are mathematically precise but don't account for fees or payment timing variations between lenders.

Q2: What's a typical personal loan rate in Canada?
A: Rates vary (5%-36% APR) based on credit score, loan amount, and term. Prime borrowers typically get 5-10%.

Q3: Should I choose a shorter or longer term?
A: Shorter terms mean higher payments but less total interest. Compare options to find the right balance.

Q4: Are there prepayment penalties in Canada?
A: Some lenders charge prepayment penalties. Check your loan agreement before making extra payments.

Q5: How does credit score affect my rate?
A: Higher credit scores typically qualify for lower interest rates, significantly reducing total loan cost.