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How to use PPMT Function in excel (3 Easy Steps)

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Duration: 3:17
Submitted: 7 months ago
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Description:

If you're looking for a way to calculate your loan payments or mortgage payments, look no further than the PPMT function in Excel.

This handy little function can do all the heavy lifting for you, and it's not as complicated as you might think. In this blog post, we'll discuss what the PPMT function is and how to use it.

We'll also provide some examples so that you can see how it works in action. So whether you're a beginner or an experienced Excel user, this post has something for everyone!

Table of Content;

00:00 INTRODUCTION

00:20 PPMT Function in Excel

03:00 conclusion

What is PPMT Function in excel?

The PPMT function in Excel calculates the principal part of payments. In other words, it calculates the payments that are applied to the original loan amount (the principle), as opposed to interest and other charges.

When to use PPMT Function in excel?

This can be helpful when you want to calculate your monthly mortgage or loan payments. Let's take a closer look at how to use the PPMT function in Excel.

How to Use PPMT Function in Excel

The PPMT function is fairly straightforward to use. Here's a basic example:

=PPMT(rate,nper,pv,type)

In this equation, rate is the interest rate per period, nper is the number of periods, pv is the present value (the amount you owe), and type is 0 for payments at the beginning of each period or -l for payments at the end of each period.

Here's a more detailed example:

=PPMT(B$12/100, 360, -$100000, 0)

In this equation, B$12/100 is the annual interest rate (divided by 100 to convert to a decimal), 360 is the number of months in three years, and -$100000 is the loan amount. As you can see, it's easy to enter complex equations in Excel using parentheses and brackets.

Now that we've gone over the basics, let's take a look at some examples.

Mortgage Payment Example

Suppose you have a 30-year mortgage with an annual interest rate of 12%. How much will your monthly payments be? To find out, use this equation: =PPMT(B$12/100, 360, -$100000, 0)

In this equation, B$12/100 is the annual interest rate (divided by 100 to convert to a decimal), 360 is the number of months in three years, and -$100000 is the loan amount. As you can see, your monthly payment would be $86.02.

Loan Payment Example

Now let's suppose you have a five-year loan with an annual interest rate of 18%. How much will your monthly payments be? To find out, use this equation: =PPMT(B$18/100, 60, -$10000, 0)

In this equation, B$18/100 is the annual interest rate (divided by 100 to convert to a decimal), 60 is the number of months in five years, and -$10000 is the loan amount. As you can see, your monthly payment would be $176.02.

Conclusion

The PPMT function is a handy tool for calculating loan and mortgage payments. It's easy to use, and there are plenty of examples online to help you get started. So why not give it a try? You may be surprised at how simple it is!