# 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.

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.

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

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