# How to Calculate a Loan Payment in Excel

Contents

In this blog post, we will show you how to calculate a loan payment in Excel. This is a simple and easy process that anyone can do.

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## Introduction

Finding the payment amount for a loan can seem daunting, but it’s actually pretty simple. You just need to know the amount of the loan, the interest rate, and the number of payments you’ll make. You can then use Excel to calculate your payment amount for each payment.

To calculate a loan payment in Excel, you’ll first need to know the following information:

-The amount of the loan

-The interest rate on the loan

-The number of payments you’ll make on the loan

Once you have this information, you can use Excel’s PMT function to calculate your payment amount. The PMT function takes the following arguments:

-rate: The interest rate on the loan

-nper: The number of payments you’ll make on the loan

-pv: The amount of the loan

For example, let’s say you have a $1,000 loan with an annual interest rate of 5%. You want to make monthly payments on this loan for two years. In this case, nper would be 24 (2 years x 12 months), and pv would be -1000 (because you’re paying out cash). With these arguments, the PMT function would return a payment amount of $48.05.

## Setting up the Loan Payment Formula in Excel

You can calculate a loan payment in Excel using the PMT function. This function takes into account the loan amount, the interest rate, the number of payments, and whether the payments are made in advance or in arrears. You can also use the PMT function to calculate the loan payment for a given period.

### Entering the Loan Amount

The first step is to enter the loan amount into a cell. For this example, we will use cell A1. After the loan amount is entered, the next step is to enter the interest rate. This can be done in a number of ways, but for this example we will use the cell next to the loan amount, cell A2. It’s important to remember that when entering the interest rate, it should be entered as a percentage. So, if the interest rate is 6%, it should be entered into the cell as .06 (without the percentage sign).

### Entering the Loan Term

One of the most important factors in calculating a loan payment is the loan term. The loan term is the length of time over which you will make payments on the loan. The longer the loan term, the lower your monthly payment will be, but the more interest you will pay over the life of the loan. You can enter the loan term into Excel by typing “=term” into a cell, with “term” being replaced by the number of months in your loan term. For example, if you have a four-year loan, you would type “=48” into the cell (4 years x 12 months = 48).

### Entering the Interest Rate

Interest is calculated based on the unpaid daily balance of your loan. For example, if you are making monthly payments, each month’s interest is calculated based on the amount of the loan that was unpaid at the beginning of the month.

In Excel, you can calculate a monthly payment for a loan using either the PMT function or the PPMT function. The PMT function calculates the payment for a loan with constant payments and a constant interest rate, while the PPMT function calculates the principal part of a payment.

To calculate a monthly loan payment in Excel, you can use either of the following formulas:

=PMT(interest_rate/12, number_of_payments, -loan_amount)

=PPMT(interest_rate/12, number_of_payments, -loan_amount)

Both formulas require an interest rate per period (the interest rate divided by 12 for monthly payments), the number of payments, and the loan amount. The only difference between the two formulas is that PMT also requires you to enter a negative value for the loan amount (indicating that it is a debt), while PPMT requires a positive value.

The following steps show how to use either formula to calculate monthly loan payments in Excel.

1. enter the interest rate into cell A1 as a percentage (for example, 6%).

2. Enter the number of payments in cell A2 (for example, 60 for 5 years).

3. To calculate your monthly payment using PMT, enter =PMT(A1/12,A2,-A3) into cell A3, where A3 is the total loan amount. To calculate your monthly payment using PPMT , enter =PPMT(A1/12There are four basic steps to setting up any form of payment formula in Excel: inputting values for timely intervals (months or years), understanding what each function does within that equation -PV stands for “present value” or “principal”; FV stands for “future value”; NPER stands for “number of periods”; and PMT stands for “payment”-, and then formatting cells to create graphs or visual aids that make information easily digestible.,A2,-A3) into cell A3

4. For both formulas, change the format of cell A3 to Currency format with two decimal places (select cell A3, right-click, and then select Format Cells).

## Calculating the Loan Payment

You can calculate the loan payment in Excel by using the PMT function. This function will calculate the payment for a loan with constant payments and a constant interest rate. You will need to input the interest rate, the number of payments, and the loan amount. The PMT function will output the payment amount.

### Using the PMT Function

Excel’s PMT function is used to calculate the payment for a loan based on constant payments and a constant interest rate. The function takes the following arguments:

rate – The interest rate of the loan.

nper – The total number of payments for the loan.

pv – The present value of the loan, i.e., the total amount that is being borrowed.

fv – The future value of the loan, i.e., the desired amount to be left after all payments have been made. This is typically set to 0 for loans.

type – The type of loan payment, which can be either 0 (for a regular payment), 1 (for a beginning-of-period payment), or 2 (for an end-of-period payment).

Here’s an example of how to use the PMT function to calculate a monthly payment on a $10,000 loan with an annual interest rate of 5% and a term of 60 months:

=PMT(5%/12,60,-10000,0)

This returns a payment of $188.71 per month.

### Using the PPMT Function

The PPMT function in Excel calculates the principal payment for a loan that has periodic payments. The syntax for the PPMT function is:

PPMT(rate, per, nper, pv, [fv], [type])

where:

rate – the interest rate per period

per – the period for which you want to calculate the principal payment

nper – the total number of periods in the loan

pv – the present value of the loan (the amount you will borrow)

fv – optional; the future value of the loan (the amount you will owe at the end of the loan) If omitted, fv defaults to 0.

type – optional; indicates when payments are due. If omitted, type defaults to 0

To use the PPMT function:

1. Enter your loan information into Excel. In cells A1 through A6, enter labels for Loan Amount, Interest Rate, Number of Payments per Year, Loan Term in Years, Payment Number and Principal Payment.

2. In cells B1 through B6, enter your loan information. In cell B1, enter the present value of your loan (the amount you will borrow). For example, if you are borrowing $10,000 at an interest rate of 6%, enter 10000. In cell B2, enter 6% or .06 to represent an interest rate of 6%. In cells B3 and B4 respectively, enter 12 and 5 to represent monthly payments for 60 months (5 years). If you want to make biweekly payments instead of monthly payments (26 payments per year), change 12 to 26 in cell B3. In cell B5 and B6 respectively , leave blank or enter 0 for Payment Number and Principal Payment . These two cells are where we will insert our formulas.

3 Select cell B6 . This is where we will insert our PPMT formula to calculate the principal payment on our $10,000 loan at 6% interest for 60 months (5 years). Click on the Formulas tab and then select Insert Function… from the Function Library group . Or you can just type =PPMT( into cell B6 . The Insert Function dialog box should appear .

4 InOr select from=”/P/Pmt” from list if functions . Notice that after we type =PPMT( into cell B6 , Excel’s auto-complete feature displays a list of available functions that start with “P.” We scroll down and select “PPMT” from this list . Alternatively , we could have just continued typing “PPMT” into cell B6 until Excel displayed only “PPMT” as an option in its auto-complete featurelist./ppmt from this list./p

5 With “ppmt” selected as our function , we now need toworried about what arguments go into our function./pfill insome arguments./pOur first argument is rate so we click on cell B2 which contains our 6% interest rateto link it to our function./pthen select “%” from percent sign dropdown menu that appears /pto indicate that 6% is a percentage value./p

Now we need specify when our payments are made during year so selecting cell type argument and 0 from drop down menu ./ptells excel that payments are made at beginning period./pClick OK button when finished filling in all arguments/pYour should display -562.28905077262687029!/pThis -562.28 means that each month during life our loan ./pwe will need pay 562 dollars toward principle ./pletting us know how much each payment eating away at outstanding balance/p

## Conclusion

The Bottom Line

You can use an Excel spreadsheet to calculate your loan payments. All you need is the loan amount, the interest rate, and the length of the loan. If you don’t have Excel, you can use a free online calculator.