Take the default $15,000 personal loan at 9 percent APR over 5 years. The monthly interest rate is 9 percent divided by twelve, and the term is 60 monthly payments. Running those through the standard amortisation formula gives a payment of about $311 a month. Across all 60 payments you repay about $18,683 in total, of which roughly $3,683 is interest and the original $15,000 is principal. Because the loan amortises, early payments are mostly interest and later ones mostly principal, but the monthly amount stays level throughout. The footnote rates are a useful sanity check: bank personal loans typically land between 7 and 12 percent, lines of credit a little lower, and credit cards far higher near 20 percent, so consolidating card debt into a 9 percent loan like this one is often the point of the exercise.
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Amount (CAD)
How it is calculated
A personal loan uses the same fully amortising math as a mortgage or car loan, just over a shorter term and usually unsecured. The tool divides the annual APR by twelve to get the monthly rate, multiplies the term in years by twelve to get the number of payments, and solves the standard annuity formula for the level monthly payment that retires the balance exactly at the end. Total paid is the monthly payment times the number of payments, and total interest is the difference between that and the amount borrowed. The figure assumes a fixed rate, no origination or insurance fees, and no early prepayment, all of which would change the real cost. Paying a little extra each month, or choosing a shorter term, cuts total interest because less principal sits outstanding accruing interest over time.
Frequently asked questions
Personal loan rates Canada?
Major banks 7-12% APR. Credit cards 19-23%. Lines of credit 7-10% (HELOC ~prime + 0.5%). Best rate via credit union or LoC.
Is personal loan interest tax deductible in Canada?
Personal loan interest is generally not tax deductible in Canada unless the borrowed funds are used to earn investment or business income. The CRA requires a direct link between the loan and the income-earning purpose. Interest on loans used for personal expenses such as vacations or debt consolidation provides no deduction.
What is the maximum personal loan term in Canada?
Most Canadian banks and credit unions offer personal loan terms ranging from 1 to 7 years, though some lenders extend to 10 years for larger amounts. Longer terms lower monthly payments but increase total interest paid. Shorter terms cost less overall if you can manage the higher monthly obligation.
Does paying off a personal loan early save money in Canada?
Yes, paying off a personal loan early reduces the outstanding principal, which means less interest accrues over the remaining term. Some lenders charge a prepayment penalty, so check your loan agreement before making lump-sum payments. Even with a modest penalty, early payoff often saves money on longer-term loans with higher rates.