Note Personal Promissory Calculator Canada

Personal Promissory Note Formula:

\[ Payment = P \times \frac{r (1 + r)^n}{(1 + r)^n - 1} \]

Principal Amount (P):

CAD

Annual Interest Rate:

Number of Payments (n):

periods

Payment Frequency:

Payment Amount:

Total of Payments:

Total Interest:

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1. What is a Personal Promissory Note?

A personal promissory note is a legal document in which one party promises to pay another party a definite sum of money, either on demand or at a specified future date. In Canada, these are commonly used for personal loans between individuals.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

\[ Payment = P \times \frac{r (1 + r)^n}{(1 + r)^n - 1} \]

Where:

\( P \) — Principal loan amount (CAD)
\( r \) — Periodic interest rate (annual rate divided by number of payment periods per year)
\( n \) — Total number of payments

Explanation: This formula calculates the fixed payment amount required to fully amortize a loan over its term, accounting for both principal and interest.

3. Importance of Payment Calculation

Details: Accurate payment calculation ensures both parties understand the repayment terms, helps prevent disputes, and ensures the note complies with Canadian lending laws regarding interest rates and repayment terms.

4. Using the Calculator

Tips: Enter the principal amount in CAD, annual interest rate as a percentage, number of payments, and payment frequency. All values must be valid (principal > 0, rate ≥ 0, periods ≥ 1).

5. Frequently Asked Questions (FAQ)

Q1: What is the maximum legal interest rate in Canada?
A: The Criminal Code sets a maximum annual interest rate of 60% in Canada. Rates above this are considered criminal.

Q2: Are promissory notes legally binding in Canada?
A: Yes, properly executed promissory notes are legally binding contracts in all Canadian provinces and territories.

Q3: What's the difference between simple interest and compound interest?
A: Simple interest is calculated only on the principal, while compound interest is calculated on principal plus accumulated interest.

Q4: Should I have a lawyer review my promissory note?
A: For significant amounts, it's advisable to have a Canadian lawyer review the note to ensure it complies with provincial laws.

Q5: What happens if payments are missed?
A: The note should specify consequences for default, which may include late fees, acceleration of the debt, or legal action.