In this tutorial, we will be exploring the PPMT function in Excel. This function is used to calculate the principal part of a payment on a loan based on a constant interest rate and periodic, constant payments.
By the end of this tutorial, you will have a strong understanding of how to use this function in your own Excel sheets.
- First, enter the PPMT function into a cell in your Excel sheet. The function takes several arguments, including a rate (the annual interest rate of the loan), the number of periods (the number of payments made on the loan), present value (same as rate), and face value (enter 0 if there is no face value).
- Once all of the arguments have been input, close the bracket and hit Enter to calculate the principal part of the payment.
- The PPMT function will return the principal part of the payment as a negative number. This is because the payment is considered a “cash outflow” from your finances.
The PPMT function in Excel is a useful tool for calculating loan payments and understanding the breakdown of those payments. By following the steps outlined in this tutorial, you should now be able to use this function with confidence in your own Excel sheets.