What Is a PMT Function?




A PMT function is used when you want to know how much your monthly payment would be on a loan based on an interest rate and a constant payment schedule.  In the following example, you are looking at purchasing a car and will need to borrow $20,000.  The bank will give you a loan at 6.8% interest and you will have to pay back the loan in 3 years.

Step 1: How to Calculate a Payment Using Excel PMT Function

The first step calculating your payment using Excel's PMT function is to enter the following:

In the cell you want your formula to appear:
1.  Type the equal sign
2.  Type PMT

Step 2: NPER

The next step is to enter the number of payments for the life of the loan.  If you have a three year loan and you are making monthly payments, then you will have 36 (12 months multiplied by the number of years) NPER.

Step 3: PV

The last step in the PMT function is to enter the PV.  PV stands for present value and represents the amount of money that you are borrowing.  For example:  If you are borrowing $20,000, the PV would be 20000.  Take note that you do not include commas in Function Arguments.



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    Question 1 year ago on Step 3

    why aren't we supposed to add commas in the PMT function?