Loan Calculator Canada
About this Loan Calculator
This loan calculator can help you find the payment amount and other information about your loan. You only need to adjust 6 inputs to get results with this loan calculator. The following inputs are required for the calculator to produce accurate results:
Loan Amount: This is the loan principal. It is the amount of money that you borrow plus any fees that may be added to the loan.
Interest Rate: This is a fixed interest rate of your loan. This calculator assumes a fixed interest rate because it is impossible to accurately predict and calculate future variable interest rate.
Loan Term: This is how long it will take for your loan to mature. At the end of the term, you will have your loan paid off in full. The longer your loan term, the less your monthly payment is, but the larger your loan total cost will be.
Payment Frequency: This is how often you will make payments on the loan. Most loans in Canada have monthly or bi-weekly payments.
Compounding Frequency: How often your interest is compounded on your loan. Different loan products have different compounding periods. Canadian mortgages are compounded semi-annually, while credit card debt is compounded monthly. Compounding frequency affects your payment amount and the total interest amount you pay.
Loan Payment Formula
To calculate your loan payments, you can use a simple loan payment formula that takes into account the loan's principal (the amount you borrowed), the loan’s term length, and the interest rate.
where
r = Periodic Interest Rate
n = Number of Payments
To find the periodic interest rate, you will need to know your payment frequency. This is how often you’ll be making loan payments. For example, if you will be making monthly loan payments, then your payment frequency is 12 (the number of months in a year). To find the periodic interest rate, divide the annual interest rate by the number of payments you’ll make in one year. You’ll then convert the rate into decimal form.
Loan Calculation Examples
While you can use this loan payment calculator to find your payment amount easily, you can also calculate it manually. For example, let’s say you take out a $10,000 personal loan with a 5% interest rate and you have to pay it back over 5 years. How much would your monthly loan payment be?
Using the loan payment formula for a monthly payment frequency, you will first need to find the periodic interest rate and the total number of payments. The periodic interest rate would be 5% divided by 12, which gives a monthly interest rate of 0.4166%. The total number of payments is 12 payments in a year multiplied by 5 years, or 60 total payments. You can then use the formula:
The loan payment would be $188.71 per month for five years.
Payday Loan Example
Payday loans are calculated differently compared to other loan types. That’s because the loan terms for payday loans are very short. They typically are paid back in two weeks. Because of this, the loan payments are structured differently, where you will make a single repayment at the end of your loan term that fully pays off the loan.
Let’s take an example of a $1,000 payday loan at an annual interest rate of 400%. You’re required to pay back the loan in two weeks. How much will you need to pay back?
The periodic interest rate would be for a bi-weekly period. To convert your annual interest rate to a bi-weekly interest rate, you could divide 400% by 26, which results in a bi-weekly rate of 15.385%. The total number of payments is one, at the end of the term.
Using the loan formula:
Since there is only one payment, another way to calculate your payment is to simply add the bi-weekly interest rate to the loan amount:
After two weeks, you will need to pay back $1,153.85. Payday loans are an expensive way to borrow money!
How To Calculate Loan Interest
To calculate the total interest paid on a loan, you will need to know your loan payment amount. Once you know how much your loan payment amount would be, to calculate the total interest paid on this loan, you would use the following formula:
Total Interest Paid = (Loan Payment x Number of Payments) – Loan Amount
For example, let’s say that you borrowed $10,000 for 5 years at a 5% interest rate. From our earlier example, we found the monthly payment amount would be $188.71, spread out over 60 monthly payments. How much interest would you pay over the life of this loan?
Borrowing $10,000 at a 5% rate would cost you $1,322.60 due to interest charges over 5 years.
This calculation uses the total lifetime payment of your loan, which is also another result that you can get from this page’s loan calculator. The total lifetime payment can be found by this formula:
Total Lifetime Payment = (Loan Payment x Number of Payments)In the above example, that would be $188.60 x 60 months, or $11,322.60.
Some loan types, such as mortgages, have term lengths that are shorter than the loan’s amortization period. You can use a mortgage interest calculator to find the total interest paid in one mortgage term.
Types of Interest Rates
Personal loans in Canada will have either a fixed interest rate or a variable interest rate. This rate varies depending on certain factors, such as your creditworthiness, income, and debt. A fixed interest rate is when the loan's interest rate is set for the life of the loan. This means that your monthly payments will stay the same, even if interest rates go up. A variable interest rate is when the loan's interest rate can change over time. This is usually based on the prime rate. This means that your monthly payments could go up or down, depending on how interest rates change. If rates go up, your payment will need to go up too in order to pay off your loan at the end of your term.
Other loan types can either have a fixed rate or a variable rate. You can choose the option that best suits you, such as choosing between a fixed or variable mortgage. However, some loan types are more likely to have variable interest rates than others. Types of loans with variable rates include home equity lines of credit (HELOCs), personal lines of credit (LOC), student loans, and investment loans.
Student Loan Interest Rates
Government student loans for post-secondary students can have a provincial portion and a federal portion. The interest rate for the provincial portion of your student loan will depend on your province.
For example, Alberta student loans will have a variable rate (floating rate) of the CIBC prime + 1%, or a fixed rate of CIBC prime + 2%. This means that if the prime rate is currently 3.70%, then a variable-rate student loan would have an interest rate of 4.70%, or you can lock-in a fixed rate of 5.70%.
Not all provinces charge interest on the provincial portion of your government student loans. For example, British Columbia does not charge interest on BC provincial student loans. Other provinces that don’t charge interest on student loans are: Manitoba, Nova Scotia, New Brunswick, PEI, and Newfoundland & Labrador. Additionally, student loan forgiveness programs are also decided on a provincial level. The table below shows student loan interest rates for government loans, current as of June 2022.
Canada Student Loan Interest Rates
| Federal/Provincial | Variable Rate | Variable Rate |
|---|---|---|
| Alberta | Prime + 1% | Prime + 2% |
| Ontario | Prime + 1% | Not Offered |
| Quebec | Prime + 0.50% | Prime + 0.50% |
| Saskatchewan | Prime | Prime |
| British Columbia | 0% | 0% |
| Manitoba | 0% | 0% |
| Nova Scotia | 0% | 0% |
| New Brunswick | 0% | 0% |
| Prince Edward Island | 0% | 0% |
| Newfoundland & Labrador | 0% | 0% |
| Canada | Prime | Prime + 2% |
Payday Loan Interest Rates
Payday loans have extremely high interest rates. Even though payday loans are only borrowed for a short amount of time, usually two weeks, the interest charged can still be significant. For example, a typical two-week payday loan with a $15 per $100 fee would have an annual percentage rate (APR) of almost 400%. In comparison, credit cards typically have APRs ranging from around 20%, although you can also find low-interest credit cards or cards with balance transfer offers.
Payday loan fees are regulated in all provinces in Canada, with the exception of Quebec. Instead of putting a cap on the fees that a payday loan lender can charge per $100 borrowed, Quebec puts a cap on the interest rate that can be charged. Payday loans in Quebec cannot have an interest rate higher than 35%. This means that payday loans are almost non-existent in Quebec.
The table below shows the maximum fees that payday loan lenders can charge, and the equivalent interest rate as an annual percentage rate (APR).
Maximum Allowed Payday Loan Interest Rates in Canada
| Province | Max Cost of Borrowing $100 | APR* |
|---|---|---|
| Manitoba | $17 | 442.00% |
| Nova Scotia | $17 | 442.00% |
| Saskatchewan | $17 | 442.00% |
| Alberta | $15 | 390.00% |
| British Columbia | $15 | 390.00% |
| New Brunswick | $15 | 390.00% |
| Ontario | $15 | 390.00% |
| Prince Edward Island | $15 | 390.00% |
| Newfoundland & Labrador | $14 | 364.00% |
| Quebec | N/A | 35.00% |
*For a two-week payday loan
Source: Financial Consumer Agency of Canada
For example, the maximum that a payday lender in Ontario can charge is $15 per $100 borrowed. This means that if you were to take out a $100 payday loan and did not repay it for two weeks, you would owe $115 in total after two weeks. If you do not pay off the loan, then interest will also be charged on the payday loan fee of $15. Payday loans are therefore very expensive, and should only be used as a last resort.
If you are considering taking out a payday loan, there are some other options that may be better for you. For example, you could try borrowing money from a friend or family member, using a credit card, or taking out a personal loan from a bank or credit union. All of these options will have much lower interest rates than a payday loan, and will not put you at risk of getting into debt that you cannot afford to repay.
Interest Rate vs. Annual Percentage Rate (APR)
An interest rate is the percentage of a loan that a lender charges as interest. An annual percentage rate (APR) is the total cost of borrowing money, expressed as a percentage of the total loan. The APR includes the interest rate, as well as any other fees that may be charged by the lender. This makes APR a more accurate way for borrowers to find out how much a loan will really cost. An extreme example of this is payday loans, where the fee of the loan makes up the majority of the cost of the loan. Use an APR calculator to find your loan’s APR rate and see how it reflects the true cost of borrowing for your loan.
How Does Compounding Affect Loans?
Compounding can have a significant impact on your loan repayment, as it can increase the total amount owed. When interest is compounded, the borrower pays not only the principal of the loan, but also the accumulated interest from previous periods. This causes the total amount owed to increase over time. The longer your term, the more time there is for interest to compound.
That’s why the trade-off for choosing a longer mortgage term is that you benefit from being able to make lower payments, but the total interest paid on your loan will be higher. Paying off your mortgage early can save you money, although mortgage penalties can take a bite into your interest savings. In some cases, it might not make sense to pay off your mortgage early.
This personal loan calculator uses annual compounding for a loan that is being borrowed. Since you are borrowing money, compounding is working against you. To see how compound interest can work for you, such as when you are saving or investing, use our compound interest calculator.