PPMT Function Excel
PPMT function in excel is a financial function that is used to calculate the payment for a given principal and the value returned by this function is an integer value. For instance, you can utilize PPMT function to get the principal amount of an installment for the first period, the last period, or any period in the between.
The PPMT function in excel have the same fields as the PPMT in Excel except for an extra field – ‘Per’
“Per” is the specific pay period for which one wants to compute the amount being paid towards the principal. FV(Future Value) is an optional argument, if omitted, the fv takes on the default value 0.
How to Use the PPMT Function in Excel? (with Examples)
If we need to calculate the payments on the principal for months 1 and 2 on a $10,000 loan, which is to be paid, off in full after 3 years with the monthly payment of $500. Interest is charged at a rate of 5% per year and the loan repayments are to be made at the end of each month.
To calculate this we will use the ppmt in excel.
Applying the PPMT function with all input values as shown above for every month installment the principal amount for each month
Similarly, applying PPMT function to other periods as well we have the principal amount of each period is as shown below
As you can see above for each period the principal amount which totals the amount as the loan amount which is $200000.
If the loan amount is $10,000 with the interest rate of 10% and the period of the loan is 2 years, then the principal amount for 1 month of the loan will be calculated using the ppmt in excel as shown below.
Using the PPMT function we compute the principal amount for the 1 month
Here, the fv is optional and since there is no future value we took it as 0 and the type is 0 as the payment is made at the end of the month, even if we skip the last two arguments still we will get the desired result
Things to Remember
- The input rate has to be consistent. If the payments are made quarterly, so the annual interest rate will be converted into the quarterly rate that is (rate%/4) and the number of the period has to be converted from years to quarter (=per*4)
- By convention, the loan value (pv) is entered as a negative value
This has been a guide to PPMT Function in Excel. Here we discuss the PPMT Formula Excel and how to use PPMT Function along with practical examples and downloadable excel templates. You can have a look at other articles on excel functions –