How to Use the PMT function to determine the payment of a loan
To determine the payment amount for a loan based on constant payments and a constant interest rate, you can use the PMT function. Here is the syntax that is used:
PMT(rate, nper, pv, fv, type)
rate: The interest rate of the loan.
nper: The total number of payments for the loan.
pv: The present value. This is also referred to as the principal.
fv: The future value. This is the amount you want after the last payment is made. If fv is omitted, it is assumed to be 0.
type: A number that indicates when payments are due. 0 or omitted indicates the end of the period, and 1 indicates the beginning of the period.
To determine the payment for a loan:
- In cell B1 enter the interest rate.
- In cell B2 enter the number of periods in months.
- In cell B3 enter the amount of the loan.
- In cell B5 calculate the payment after one month with the following formula: =-PMT($B$1/12,$B$2,$B$3).
- Press Enter.
This tip is compatible with Excel 97, 2000, 2003 and 2007.
