Skip to content

5000+ Great Articles

Best Articles & Essays: Interesting Articles to Read Online

  • How To Set Up a YubiKey As a Two-Step Authentication Method How-To
  • Best Audacity Settings for Voice Over How-To
  • How to Use the Magnifier on iPhone and iPad General Software
  • Great ideas for 3D printing for the holidays 2022 technology
  • The 17 Greatest War Movies of All Time technology
  • Top 10 Differences between Windows 7 and Windows 8/10 Windows 10
  • The best way to add a slide number to PowerPoint Office Tips
  • How to Partition an External or Internal Hard Drive in OS X OS X

How To Use The PMT Function In Excel

Posted on October 7, 2020 By blog_786 No Comments on How To Use The PMT Function In Excel

If you’ve ever thought about getting a mortgage or any other loan, knowing how to use the PMT function in Excel can give you some idea of ??what your payments will look like.

PMT stands for Payment. After you enter all the necessary data into the function, it will return you the periodic payment that you need to make.

How To Use The PMT Function In Excel

Understanding how the PMT function in Excel works can help you measure how long it will take to pay off a loan if you pay a certain amount, or based on a change in the interest rate.

How does the PMT function work in Excel

The PMT function is much simpler than other Excel functions like Index or Vlookup But that doesn’t make it any less useful.

To receive recurring loan payments, you need to provide the following input to the PMT function.

  • rate: the interest rate on the loan.
  • nper: The total number of payments made during the entire loan period.
  • pv: initial loan balance (present value).
  • fv: cash remaining after loan disbursement (future value). This is optional and defaults to 0.
  • type: whether payments should be made at the beginning of each billing period (1) or at the end (0). This is also optional.

An easy way to understand how you can use this feature is to start with a simple example.

– /

Let’s say you are considering taking a personal loan of $ 10,000 from your bank. You know that you want to repay it in 4 years (48 months), but you don’t know what interest rate you will receive when the bank repays your loan.

To estimate the size of your payment at different interest rates, you can use the PMT function in Excel.

Set up a spreadsheet with known fixed values ??at the top. In this case, it is the loan amount and the number of payments. Create one column for all possible interest rates and an empty column for payment amounts.

How To Use The PMT Function In Excel

Now in the first cell “Payments” enter the PMT function.

= PMT (B5; B2; B1)

Where B5 is the cell with the interest rate, B2 is the cell with the number of payments, and B1 is the cell with the loan amount (present value). Use the “$” symbol for B1 and B2 as shown below to keep these cells constant as you populate the column in the next step.

How To Use The PMT Function In Excel

Press Enter and you will see the amount paid at that interest rate.

While holding down the Shift key, place the cursor in the lower right corner of the first cell with the payment amount until the cursor changes to two horizontal lines. Double-click and the rest of the column will be populated with payments at different interest rates.

How To Use The PMT Function In Excel

These results show how much payment you can expect on this loan, depending on what interest rate the bank is offering.

What’s useful about using Excel for this is that you can also change the cells with the total loan amount or the number of payments and watch how this changes the amount of the recurring loan payments.

Other examples of PMT function in Excel

Let’s take a look at some more complex examples.

Imagine that you have won a major award, and the organization that will present you with the award has given you a choice: accept it as a lump sum or annuity. You can get $ 1,000,000 in 5% annuity over 10 years or $ 750,000 in a lump sum today. Which is the best option in the long run?

The PMT function in Excel can help. In the case of an annuity, you need to know what the annual payment is.

To do this, use the same approach as in the previous example, but this time the known values ??are:

  • future value: $ 1,000,000
  • rate: 5%
  • number of payments: 10 (one annual payment for ten years)

How To Use The PMT Function In Excel

Enter function:

= PMT (B2; B3,0; B1,0)

A zero at the end means that payments will be made at the end of each period (year).

Press Enter and you will see that the annual payment is $ 79,504.57.

How To Use The PMT Function In Excel

Then let’s see how much money you’ll have in 10 years if you take $ 750,000 today and put it into an investment that yields a modest interest rate of just 3%.

Determining the future value of the lump sum requires another Excel formula called FV (Future Value).

This formula requires:

  • Interest rate: 3%
  • Number of payments: 10 (years)
  • Payments: 0 (amount not withdrawn)
  • Present value: – $ 750,000 (deposited amount).

This formula: = FV (B2, B3, B4, B1)

How To Use The PMT Function In Excel

Press Enter and you will see that if you invested all $ 750,000 today and earned only 3%, then in 10 years you would have made $ 7,937.28 more.

How To Use The PMT Function In Excel

This means taking a lump sum today and investing it yourself will be smarter, because you can probably earn a lot more than just 3% if you invest smartly.

The PMT function in Excel is useful

Whether you are applying for a home loan, car loan, or considering lending money to a family member, Excel’s PMT feature can help you figure out the right loan terms for your situation.

So the next time you’re thinking about going to the bank or car dealership, sit down with Excel first and do your homework. Understanding the impact of interest rates and payments will give you far more benefits than taking a cold walk and having to take someone else’s word for it.

If you use Excel a lot, you should check out our Excel Tips and Tricks. And if you know of other cool use cases for the PMT feature, share them in the comments section below.

–

Share this:

  • Twitter
  • Facebook
Office Tips

Post navigation

Previous Post: How to Download Windows Media Player 12 for Windows 10
Next Post: 10 Troubleshooting Ideas For When Your Amazon Fire Stick Is Not Working

Related Posts

  • Preserve Cell References when Copying a Formula in Excel Office Tips
  • What Is about: blank , How Do You Remove It? Office Tips
  • How To Show Word Count In Microsoft Word Office Tips
  • Best New Features in Microsoft Office 2019 Office Tips
  • How to Repair a Damaged or Corrupt Outlook PST File Office Tips
  • Center Your Worksheet Data in Excel for Printing Office Tips

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Archives

  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • November 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • March 2021
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • December 2019
  • July 2019
  • May 2019
  • April 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018

Categories

  • AI Tools & Guides
  • Amazon Web Services
  • Apple Watch
  • Computer Tips
  • Cool Websites
  • Featured Posts
  • Free Software Downloads
  • Gadgets
  • Gaming
  • General Software
  • Google Software/Tips
  • Hardware
  • Help Desk
  • How-To
  • iOS
  • iPad
  • iPhone
  • islamic Books
  • Linux
  • Linux Tips
  • Mac OS X
  • macOS
  • MS Office Tips
  • Networking
  • Office Tips
  • OS X
  • Product Reviews
  • Reviews
  • Safari
  • Smart Home
  • Smartphones
  • Software Reviews
  • technology
  • text
  • Tools Review
  • Troubleshooting
  • Tutorials
  • Uncategorized
  • Urdu Books PDF
  • Web Site Tips
  • Windows
  • Windows 10
  • Windows 7
  • Windows XP Tips
  • Wordpress
  • TemplateMonster WordPress Theme Review – Build a Site With Ease
  • 6 Best FTP Clients For Android
  • MailTag: Real-time Email Tracking, Made Easy
  • Here are the Top 10 highest paid YouTubers of 2017
  • Protect Your Facebook Account From Hackers (2017)
DMCA.com Protection Status

Recent Posts

  • Buying Bitcoin in India? Top 4 Indian Bitcoin Exchange Compared
  • TemplateMonster WordPress Theme Review – Build a Site With Ease
  • How to use Canva Docs to create documents online
  • PS4 won’t turn on but beeps? 9 Fixes Worth Trying
  • How to Create a Vision Board on Canva

Recent Comments

  1. How to Cancel Your Wall Street Journal (WSJ) Subscription on How to Cancel Your New York Times Subscription
  2. How to Fix Spotify Lyrics Not Showing Up on How to Delete or Delete Downloads from Spotify
  3. 6 Best FTP Clients For Android on Disney Plus not working on Fire TV? Try These 8 Fixes
  4. Protect Your Facebook Account From Hackers (2017) on Top 5 Facebook Alternative Apps For iOS Devices
  5. 4 Ways to Share WiFi Without Giving Away Your Password on How to fix if PS5 Not Connecting to Internet?
  • Best electric calculator 2020

    Best electric calculator 2020. 1 - Calculated Industries 5070 ElectriCalc Pro Electrical Code Calculator | Updateable and Compliant with NEC 1996 to

  • Top 3 Best Cheap Android Tablets Gadgets
  • YouTube White Noise Channels technology
  • How to Bypass Microsoft Edge in Windows 10 Windows 10
  • The Basics Of Creating Your First YouTube Channel Google Software/Tips
  • Find the WiFi Password in Windows 10 Using CMD How-To
  • How to Customize Notification for Every Contact on WhatsApp How-To
  • The 7 Most Popular Video Game Genres Gaming

Copyright © 2023 How To Blog.

Powered by PressBook News WordPress theme

Go to mobile version