**What Is PMT Function In Excel?**

The

PMT function in Excelcalculates the total amount of a loan i.e., the principal and the interest, to be paid over a period based on fixed payments and a fixed interest rate. This function calculates weekly and monthly periodic payments.

The **PMT excel function **is an inbuilt function, so we can enter the formula directly in the cell or choose it from the “**Function Library**”.* *

For example, the below table contains the annual interest rate, loan period, and amount details required to determine the payment towards the loan of **$80,000**, the interest rate is **6% **per year, with annual payment as the loan payment frequency.

Select cell **B7**, enter the formula **=PMT(B3,B4,B5),** and press the “**Enter**” key.

The output is shown above. The **PMT excel function **in cell **B7** returns a negative value, indicating that it is an outgoing payment.

##### Table of contents

###### Key Takeaways

- The
**PMT Excel function**calculates the total amount we need to pay towards our availed loan over a fixed period and interest rate. And it displays the output in the**Currency**format. - The
**PMT()**takes five arguments:**rate**,**nper**,**pv**,**fv**, and**type**. While the first three arguments are mandatory, the remaining ones are optional. And if we omit the last two arguments from the**PMT()**, the function takes their default value of**0**for the loan payment calculations. - The
**PMT()**formula will vary depending on the loan payment frequency. Therefore, we will have to divide and multiply the arguments,**rate,**and**nper**with the number of payments per year while supplying them as input to the**PMT()**. - The
**PMT()**is useful for developing a loan payment calculator to help users assess the best suitable loan payment options.

**PMT() Excel Formula**

The **PMT excel formula **is:

The **PMT function arguments **are:

*rate**:*The loan interest rate. It is a mandatory argument.*nper**:*The total number of payments towards the loan. It is a mandatory argument.*pv**:*The principal amount or the current value of the sequence of future payments. It is a mandatory argument.*fv**:*The future value. It is the balance amount we want to achieve once we make the last payment. If we ignore this value in the**PMT**excel formula, it takes the default value of**0**. It is an optional argument.*type**:*It indicates when the payments are due. If we omit the**type**argument, the**PMT()**will consider it as**0**, interpreting the due payment time as at the end of the payment period. However, if the argument value is**1**, the due payment time is at the start of the period. It is an optional argument.

A few critical points to consider while using the **PMT function arguments**:

- If the
**rate**is less than or equal to**-1**or**nper**is**0**, the**PMT function returns**the**#NUM!**error. - If we provide non-numeric arguments as input, we will get the
**#VALUE!**error. - The
**PMT function arguments**vary according to the loan payment frequency, typically weekly, monthly, quarterly, or annually. - To determine the weekly, monthly, or quarterly payments, we must convert the annual interest rates and the number of periods in the
**PMT excel function**to weekly, monthly, or quarterly. - While the data formats of interest rate and loan amount are
**Percentage**and**Currency**, the**PMT()**return value’s default format will be**Currency**.

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**How To Use PMT Excel Function?**

We can use the **PMT Excel Function **in 2 methods, namely,

**Access through the Excel ribbon.****Use in the worksheet manually.**

[**Special Note:** First, makes sure the following details are intact.

- Ensure the input values i.e., the
**PMT function arguments,**are provided in the proper format and are according to the payment frequency- weekly, monthly, quarterly, or annually. - Then, enter the
**formula of PMT excel function**to calculate the periodic loan amount].

**#1 – Access through the Excel ribbon**

Choose a cell for the result > select the “**Formulas**” tab > go to the “**Function Library**” group > click the “**Financial**” option drop-down > select the “**PMT**” function, as shown below.

The “**Function Arguments**” window pops up. Enter the arguments as values or cell references in excel and click “**OK**”.

**#2 – Use in the worksheet manually**

- Choose a cell for the output.
- Type
**=PMT(**and enter the argument values. [Alternatively, type**=P**or**=PM**and double-click on the**PMT()**function from the list of suggestions from Excel]. - Close the bracket
**)**. - Press the “
**Enter**” key.

[**Note:** The value the **PMT function returns**:

- Includes the principal and interest and excludes any fees or taxes associated with the loan.
- It will be a negative value since it is an outgoing payment.]

We will understand the following **PMT excel function example** and determine the annual payment needed to make towards the loan.

In the below table, the values are in column C. The loan payment frequency is annual, at a fixed annual interest rate of **10%**, the loan period is **six **years, the current worth of the sequence of future payments is **$200,000**, the future value (**fv** argument) is **$0**, and the payment is due at the start of the period.

The procedure to apply the **PMT function **to calculate the annual payment is:

First, select cell **E2**, enter the formula ** =PMT(C2,C3,C4,C5,C6) **and press the “

**Enter**” key.

Alternatively, choose the target cell **E2 ****>** select the “**Formulas**” tab > go to the “**Function Library**” group > click the “**Financial**” option drop-down > select the “**PMT**” function, as shown below.

The **Function Arguments** window pops up, enter the arguments as values or cell references as shown below, and click “**OK**”.

The output is shown above. We must pay an annual amount of **$41,746.80** towards our loan for six years at an annual interest rate of **10%** and make the payments at the beginning of the payment period.

**Examples**

We will understand the **PMT function in Excel** with some advanced scenarios.

**#Example 1**

Using the PMT function, we will calculate the annual payment at the end of the loan payment period.

The following table contains the values for the mandatory** PMT()** arguments in column C. Thus, **fv **is **0**, and we need to make the annual payment at the end of the loan payment period.

The steps to determine the annual payment amount using the **PMT function in excel **are:

__Step 1__**: **Select cell **C6**, enter the formula ** =PMT(C2,C3,C4),** and press the “

**Enter**” key.

The output is an outgoing payment and, thus, a negative number. However, we can display the amount as a positive value by inserting the ‘-’ minus sign before the principal amount (**pv**).

__Step 2__**: **Select cell **C6**, enter the new formula ** =-PMT(C2,C3,C4)**, and press the “

**Enter**” key.

Or

Select cell **C6**, enter the alternate new formula ** =PMT(C2,C3,-C4), **and press the “

**Enter**” key.

The output is shown above. Now the value is changed to a positive number.

**#Example 2**

We will use the PMT function in excel to find the loan amounts for different payment frequencies**.**

The following table contains the values for the mandatory **PMT()** arguments in column C.

Now, depending on the payment frequency, provide the proper **rate **and **nper** argument values to the **PMT **function, as shown below.

The annual interest rate gets divided by the number of payments per year for the **rate **argument. And the loan period gets multiplied by the number of payments per year for the **nper **argument.

The steps to calculate the required payment amount for the specific payment frequency are:

__Step 1__**: **Select cell **C7**, enter the formula ** =PMT(C2/52,C3*52,C4) **for calculating the weekly payment amount, and press the “

**Enter**” key. The result is shown below.

__Step 2__**: **Select cell **C8**, enter the formula ** =PMT(C2/12,C3*12,C4) **for calculating the monthly payment amount, and press the “

**Enter**” key. The result is shown below.

__Step 3__**: **Select cell **C9**, enter the formula ** =PMT(C2/4,C3*4,C4) **for calculating the quarterly payment amount, and press the “

**Enter**” key. The result is shown below.

__Step 4__**: **Select cell **C10**, enter the formula ** =PMT(C2/2,C3*2,C4) **for calculating the semi-annual payment amount, and press the “

**Enter**” key. The result is shown below.

__Step 5__**: **Select cell **C11**, enter the formula ** =PMT(C2,C3,C4) **for calculating the annual payment amount, and press the “

**Enter**” key. The output is shown below.

The loan payment amounts for different payment frequencies are shown in the above image in cells **C7** to **C11**.

**#Example 3**

We will create a loan payment calculator using the **formula of PMT function** to help the user assess different loan options and pick the one that fits their requirement.

The below image shows a sample loan payment calculator.

Let us enter the loan details, which include the loan amount, annual interest rate, and loan term in years, in cells **B2:B4**. So, in the PMT function are the mandatory PMT() arguments, pv, rate, and nper. And let us take the default value of the argument **fv**, **0**.

As the previous examples show, we can choose the required payment period from the different payment frequencies. Also, we can decide whether to have our payments due at the end or at the start of the payment period. The calculator offers a **legend** to refer to the calculation factors in each scenario.

The calculator uses **PMT()** in cell **B10**, with the target cell having the data format, **Currency**.

We will use the loan payment calculator for a monthly payment frequency, with the beginning of the period as the due payment time.

__Step 1__**: **

- Select cell
**C5**, enter the formulaand press the “*=IFERROR(VLOOKUP(B5,E10:F14,2,0),””)***Enter**” key. - In cell
**B5**, enter the required loan payment frequency as**Monthly**, and press the “**Enter**” key.

The above formula will look up the calculation factor in the legend for the specified loan payment frequency in cell **B5**.

__Step 2__**: **

- Select cell
**C6**, enter the formula, and press the “*=IFERROR(VLOOKUP(B6,E17:F18,2,0),””)***Enter**” key. - In cell
**B6**, enter the due payment time as**Beginning Of Period**, and press the “**Enter**” key.

The above formula will look up the calculation factor in the legend for the specified due payment time in cell **B6**.

When we enter the above two values, the calculator uses the formula ** =IFERROR(-PMT(B3/C5, B4*C5, B2, 0, C6), “”), **that contains the

**PMT function**and

**IFERROR()**and determines the monthly payment amount in cell

**B10**.

The above formula has the minus sign before the **PMT()** to ensure the outgoing payment is displayed as a positive number in the target cell, **B10**.

Likewise, we can update the required loan details in cells **B2:B6** using the legend and review the different loan scenarios available.

**Important Things To Note **

- The
**PMT function**in excel displays the total loan payment amount as a negative value, as it is an outgoing payment. - Ensure the data formats of
argument and loan amount,*rate*argument are*pv***Percentage**and**Currency**, respectively. - We will get the
**#NUM!**error for a**rate**which is less than or equal to**-1**or**nper**is**0**and**#VALUE!**error when the arguments are non-numeric.

**Frequently Asked Questions**

**Where is the PMT function in Excel?**

We can use the **PMT e**xcel **function as follows:**

Select the “**Formulas**” tab > go to the “**Function Library**” group > click the “**Financial**” option drop-down > select the “**PMT**” function, as shown below.

**How to make a PMT function positive in Excel?**

We can make a **PMT function **positive in Excel by adding a minus sign before the **PMT() formula** or the argument **pv** ( principal or loan amount).

For example, the below table shows the loan details and the annual payment value as the output of the **PMT()** in cell **B7**.

The **PMT()** output is a negative currency value, highlighted in red and within brackets in Excel. So, to convert the negative value into a positive one, apply one of the below formulas [a or b].*a) =-PMT(B3,B4,B5)*

Or*b) =PMT(B3,B4,-B5)*

Thus, the **PMT()** output will now appear as a positive currency value.

**Why is my PMT function not working?**

The **PMT functions **may not work due to the following reasons:

1. We provided the **rate** argument as a negative value or the **nper** argument value as **0** to the **PMT()**.

2. We entered the **PMT()** argument as text values.

3. We did not supply the **rate** argument as a percentage value or the argument** pv **(loan amount) as a currency value to the **PMT()**.

4. We did not apply the **PMT()** according to the specific loan payment frequency.

**Download Template**

This article must help understand the **PMT Function**, with its formula and examples. We can download the template here to use it instantly.

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