Loan Payment Calculator

Loan payments in Canada are typically calculated using an amortization formula that spreads your repayment evenly across the loan term. The formula accounts for three key variables: the principal (how much you borrow), the interest rate (the lender's charge for lending), and the term (how long you have to repay).

The mathematical formula is: M = P × [r(1+r)^n] / [(1+r)^n – 1], where M is your monthly payment, P is the principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of payments. This is a standard amortization calculation used by virtually all Canadian lenders.

Why does more interest accrue early in the loan? In the early months, a larger portion of your payment goes toward interest because the outstanding balance is highest. As you pay down the principal, more of each payment goes toward reducing the balance. This is called "front-loaded interest" and is why making extra payments early in a loan saves the most money.

Fixed vs. variable rates: This calculator assumes a fixed rate, meaning your payment stays the same throughout the term. With a variable-rate loan, your payment or amortization period may change as the Bank of Canada adjusts its policy rate. Fixed rates provide payment certainty; variable rates may save money if rates decline.