Calculating loan repayments in Excel

The payment or PMT function in Excel can be used to calculate loan repayments. This can be very useful in both personal and business life.

All you need to do is feed in the necessary details such as the interest rate, length of the loan period and the amount of the loan into your Excel cells and the PMT function will do the rest.

The information the function requires and how it should be entered is shown below.

PMT function syntax
PMT function syntax

The square brackets around the FV and Type arguments indicate that they are optional. 0 is entered in each if they are omitted.

In the worksheet below the interest rate, number of periods and amount of the loan has been entered. We shall enter a PMT function in cell D4 to calculate the monthly payments for such a loan.

Loan information in worksheet
Loan information in worksheet

In cell D4 enter;

=PMT (C4/12, B4*12, A4)

  • In C4/12 the annual interest rate was divided by 12 to calculate the monthly interest rate. If the loan payments were weekly we would enter C4/52, and if quarterly we would enter C4/4 and so on
  • In B4*12 the number of payment periods was multiplied by 12. This was because the number of periods was entered in years, but the payments are monthly. This now calculates the number of monthly payment periods
  • A4 enters the loan amount into the function
  • The FV argument was omitted so Excel assumes 0 for the value. This means after all the payments are made the remaining total should be 0. The loan is completely paid off
  • The Type argument was also omitted so Excel again assumes 0 for the value. This means the payments are made at the end of each month

The resulting loan repayments are £1,162.95.

The worksheet below shows the completed function. Additional formulas have been added to cells E4 and F4 to calculate the total payment including interest, and the interest paid on the loan.

The formula in cell E4 is = D4*12*B4

The formula in cell F4 is = E4-A4

Loan payments calculated using the PMT function
Loan payments calculated using the PMT function

Useful Excel Links

Calculate future savings using Goal Seek

Learn how to calculate future values such as a savings amount using Excel's FV function and Goal Seek tool.

Excel functions

This page is dedicated to listing the most useful Microsoft Excel functions. Explanations on how to write each function and examples of its use are provided.

Software training videos

Online training videos for Excel, Word, PowerPoint, Photoshop, Dreamweaver, Flash, JavaScript and much much more..

Excel Formulas Ebook

Make formulas easy with this Excel formulas ebook and never fear them again.

More by this Author

  • Sort Pictures in an Excel List
    0

    If you are using pictures in your Excel spreadsheet you may be having some difficulty with sorting the pictures along with the other data in the list. The good news is that you can sort pictures in an Excel list just...

  • Simulate a Cup Draw using Excel
    0

    Microsoft Excel can do some amazing things. I like to attempt little projects testing what Excel can do. I was asked the other day to simulate a cup draw using Excel and this is the result. This article will give you...

  • Brock Lesnar Nutrition and Workouts
    2

    Brock Lesnar is a phenomenon of a man and an athlete. Brock Lesnar weighs a lean 265 lbs and yet possesses extreme speed, agility and athleticism. How a man carrying so much muscle mass can maintain such high levels of...


Comments

No comments yet.

    Sign in or sign up and post using a HubPages Network account.

    0 of 8192 characters used
    Post Comment

    No HTML is allowed in comments, but URLs will be hyperlinked. Comments are not for promoting your articles or other sites.


    Click to Rate This Article
    working