1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully repay a student loan over its term, including both principal and interest. This is the standard formula used by Canadian financial institutions for student loans.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment (CAD)
• \( P \) — 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 that will pay off both principal and interest by the end of the term.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. It allows you to compare different loan options and terms to find the most suitable repayment plan for your situation.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What interest rates do Canadian student loans have?
A: Federal student loans currently have a floating interest rate of prime + 2.0%, and a fixed rate of prime + 2.0%. Provincial rates vary.

Q2: Are there repayment assistance programs?
A: Yes, Canada offers the Repayment Assistance Plan (RAP) that can reduce or pause payments based on income and family size.

Q3: Can I pay off my loan faster?
A: Most Canadian student loans allow extra payments without penalty, which can reduce total interest paid.

Q4: Are student loan payments tax deductible?
A: In Canada, the interest portion of student loan payments is tax deductible.

Q5: What happens if I miss payments?
A: Late payments incur fees and can affect your credit score. Contact your loan servicer immediately if you're having trouble making payments.