A personal loan calculator computes the fixed monthly payment on an unsecured or secured personal loan. The standard formula is fixed-payment amortisation: monthly payment = P × r / (1 − (1 + r)−n), where P is the principal borrowed, r is the monthly interest rate (APR divided by 12), and n is the number of monthly payments.
Canada’s Cost of Borrowing Regulations (SOR/2001-101) require federally regulated lenders to disclose the annual percentage rate, total interest, and total cost of borrowing before the borrower commits. Provincially regulated lenders must comply with equivalent provincial consumer protection legislation.
Personal Loan Rate Environment in Canada (2025)
Chartered bank unsecured personal loan rates in 2025 typically range from 7% to 15% APR for borrowers with good credit. Credit unions often offer slightly lower rates for members. Online lenders and fintech platforms charge 9% to 35% APR. High-cost instalment lenders subject to provincial rate caps charge up to the provincial maximum, which most provinces set between 35% and 47% APR (effective). Payday loans are separately regulated with per-$100 cost caps of $14 to $15 in most provinces.
Total Cost Comparison by Term
Total interest paid is sensitive to both rate and term. Using a $15,000 loan at 12% APR:
| Term | Monthly Payment | Total Interest |
|---|---|---|
| 24 months | $706 | $939 |
| 36 months | $498 | $1,425 |
| 48 months | $395 | $1,953 |
| 60 months | $333 | $2,512 |
Debt Consolidation Use Case
The most common use of a personal loan in Canada is consolidating high-rate credit card debt. The average Canadian credit card carries a 19.99% purchase interest rate (the standard rate at major banks). Replacing $15,000 of card debt at 19.99% with a personal loan at 12% over 36 months saves approximately $1,390 in interest, assuming equivalent payment amounts.
Consolidation works best when the new loan rate is significantly lower than the blended rate of existing debts, and the borrower does not accumulate new credit card balances after consolidation. The Financial Consumer Agency of Canada (FCAC) publishes a debt consolidation explainer at canada.ca.
Tax Deductibility of Personal Loan Interest
Interest on a personal loan used for personal spending is not deductible under the ITA. However, if the loan proceeds are used to acquire an income-producing investment (e.g., non-registered stocks, a rental property down payment), the interest may be deductible under ITA s.20(1)(c) as interest paid on borrowed money used to earn income from a business or property.
The CRA requires a direct tracing of loan proceeds to the income-earning use. Mixing personal and investment use of a loan complicates deductibility and may require a separate loan for the investment portion.
Impact on Credit Score
Personal loans appear on Equifax Canada and TransUnion Canada credit reports. Key factors affected: payment history (35% of FICO score weight), amounts owed (30%), and credit mix (10%). Opening a new personal loan creates a hard inquiry that temporarily lowers the score by a few points. Consistent on-time payments improve payment history over time. Paying off the loan closes the account, which can modestly reduce credit mix and average account age.
Source
Cost of Borrowing Regulations (SOR/2001-101); FCAC Personal Loans information; ITA s.20(1)(c); Equifax Canada and TransUnion Canada credit reporting practices.
Frequently asked questions
- How is a Canadian personal loan payment calculated?
- A personal loan uses the same fixed-payment amortisation formula as a mortgage or auto loan: monthly payment = P x r / (1 - (1+r)^-n), where P is the principal, r is the monthly interest rate, and n is the number of months. Canada's Cost of Borrowing Regulations require lenders to disclose the APR and total borrowing cost.
- What are typical personal loan interest rates in Canada in 2025?
- Bank and credit union unsecured personal loan rates in 2025 range from approximately 7% to 23% APR, depending on the borrower's credit score, income, and lender. Online lenders and fintech lenders charge 9% to 35% APR. Provincial payday loan rate caps range from $14 to $15 per $100 borrowed in most provinces, equivalent to an effective APR exceeding 300%.
- What is the maximum term for a personal loan in Canada?
- Most unsecured personal loans are offered in terms of 12 to 60 months. Some lenders extend to 84 months for larger amounts. Secured personal loans may have longer terms. Shorter terms mean higher monthly payments but substantially less total interest.
- Can I deduct personal loan interest in Canada?
- Interest on a personal loan used for personal consumption is not tax deductible. If the loan proceeds are used to earn income from a business or investment (other than a tax-exempt income source), the interest may be deductible under ITA s.20(1)(c). The Canada Revenue Agency requires a direct link between the borrowed funds and the income-earning use.
- Does paying off a personal loan early hurt my credit score in Canada?
- Paying off a loan early closes the account, which can slightly reduce your credit mix and average account age, both factors in Canadian credit scoring models used by Equifax and TransUnion. The net effect is usually neutral or slightly negative in the short term but positive overall due to reduced debt load and better debt-to-income ratio.
- What credit score do I need for a personal loan in Canada?
- Major bank personal loans generally require a credit score of 660 or higher. Credit unions may be more flexible. Online lenders offer loans to borrowers with scores as low as 560 to 600, at higher rates. A score above 720 typically qualifies for the best available rates.
- What is the difference between a secured and unsecured personal loan?
- A secured personal loan requires collateral such as a vehicle, savings account, or other asset. If the borrower defaults, the lender can seize the collateral. Secured loans carry lower interest rates. An unsecured loan has no collateral requirement but typically charges a higher rate to compensate for the lender's greater risk.
- What is a debt consolidation loan and does it save money?
- A debt consolidation loan replaces multiple high-interest debts (typically credit cards at 19% to 28%) with a single lower-rate personal loan. The savings depend on the interest rate differential and term. Using the calculator, compare the total cost of consolidated debt vs. keeping existing balances. Consolidation only saves money if the new rate is lower and the term does not extend the repayment period significantly.
- Are personal loans reported to Canadian credit bureaus?
- Yes. Most banks, credit unions, and regulated lenders report personal loan accounts to Equifax Canada and TransUnion Canada. Payment history, balance, and account status are all reported. On-time payments build credit history; missed payments damage it. Payday lenders are not uniformly required to report, though many do.
- What fees are common on Canadian personal loans?
- Common fees include an origination or application fee (0% to 5% of the loan amount for online lenders), NSF fees for returned payments ($25 to $48), and prepayment penalties if the loan agreement includes them. The Cost of Borrowing Regulations require all fees to be included in the APR disclosure.