PMT Function in Excel - how to use it to calculate loan payment

Posted on:  08/10/2021
PMT Function in Excel - how to use it to calculate loan payment

One of Excel's most popular financial functions is the PMT function. The PMT function will calculate your payments for a loan based on the interest rate, loan amount, and the number of periods. You would use the PMT function to calculate a car or house loan.

Payment function in Excel

PMT function for a car loan

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PMT Function Syntax

PMT(rate, nper, pv, [fv], [type])

Examples of the PMT Function

Example 1: =PMT(4.25%/12,30*12,350000)

Example 1 is a PMT function not referencing cells. You will get a negative answer since it is money you have to pay. To make the answer positive, use -350000 in the formula.

Example 2: =PMT(b4/12,b3*12,-b2)

Example 2 is referencing cells. See the screenshot below.

Five arguments in the PMT function

  • rate - The interest rate for the loan.
  • nper - The total number of payments for the loan.
  • pv - The present value, or the total value of all loan payments now.
  • fv - [optional] The future value or a cash balance you want after the last payment is made. Defaults to 0 (zero).
  • type - [optional] When payments are due. 0 = end of the period. 1 = beginning of the period. Default is 0.

Tip: Wondering why [fv] and [type] are in square brackets? The brackets mean they're optional. If you don't include values for fv and type in your formula, Excel assumes your balance will be $0 at the end of the loan, and that your payments are due at the end of the period.

PMT function for a house loan

PMT function for a house loan

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Chris Menard

Chris Menard is a Microsoft Certified Trainer (MCT) and is employed full-time as a Trainer for BakerHostetler, one of the nation’s largest law firms. Menard has a YouTube channel with over 900 technology videos covering Excel, Word, Zoom, Teams, Outlook, Gmail, Google Calendar, and other resources that over 15 million viewers have appreciated. Menard also does public speaking at conferences for CPAs and Administrative Professionals. Connect with Chris on LinkedIn at chrismenardtraining.com/linked or on YouTube at chrismenardtraining.com/youtube

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