How to Calculate a Loan Payment Using Microsoft Excel

Microsoft Excel is a lovely program that can help you manage your personal or business finances. If you are applying for a loan that will have constant payments and a constant interest rate, it can easily calculate your loan payment for you. You can use this information to determine whether or not the loan is a good deal for you and to make smart financial decisions.

Difficulty:

Moderately Easy

Instructions

1. Gather the information you need. You need to know the loan principle, the interest rate, the number of months for which the interest is calculated and the total number of payments.

2. Create an Excel spreadsheet containing the above information. Key in the following headings: "Interest Rate" in cell A5, "Amount Financed" in cell A6, "Term" (number of months) in cell A7, "Monthly Payments" in cell E5 and "1st Payment Due" in cell E6.

3. Use the information you gathered to enter the appropriate information in the cells immediately to the right of the cells where you entered the headings. For example, enter the interest rate of your loan into cell A6.

4. Enter the following formula to have the computer determine your monthly payments: =PMT(B5/12,B7,B6)

5. Understand what the formula means so you can apply it in other situations. =PMT tells the computer to calculate the monthly payment, B5/12 is the interest rate divided by 12 to get the interest for one month, B7 is the number of months of the loan and B6 is the principle.

Resources

• Free Microsoft Excel tips available online.