PMT Function in Excel - how to use it to calculate loan payment
Posted on: 08/10/2021
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.
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
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rate - The interest rate for the loan.
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nper - The total number of payments for the loan.
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pv - The present value, or the total value of all loan payments now.
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fv - [optional] The future value or a cash balance you want after the last payment is made. Defaults to 0 (zero).
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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
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Chris Menard
Chris Menard is a Microsoft Trainer (MCT) and works as a full-time Trainer at BakerHostetler - one of the largest law firms in the US. Chris runs a YouTube channel with 900+ technology videos that cover various tools such as Excel, Word, Zoom, Teams, Gmail, Copilot, Google Calendar, and Outlook. To date, the channel has helped over 20 million viewers.
Menard also does 2 to 3 public speaking events yearly, presenting at the Administrative Professional Conference (APC), the EA Ignite Conference, the University of Georgia, and CPA conferences. You can connect with him on LinkedIn at https://chrismenardtraining.com/linkedin or watch his videos on YouTube at https://chrismenardtraining.com/youtube.
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