The Excel PMT Function

Related Functions:
IPMT Function
PPMT Function

Basic Description

The Excel PMT function calculates the constant periodic payment required to pay off (or partially pay off) a loan or investment, with a constant interest rate, over a specified period.

The syntax of the function is :

PMT( rate, nper, pv, [fv], [type] )

Where the arguments are as follows:

rate - The interest rate, per period
nper - The number of periods over which the loan or investment is to be paid
pv - The present value of the loan / investment
[fv] -

An optional argument that specifies the future value of the loan / investment, at the end of nper payments

If omitted, [fv] takes on the default value of 0
[type] -

An optional argument that defines whether the payment is made at the start or the end of the period

The [type] argument can have the value 0 or 1, meaning:

0   -   the payment is made at the end of the period
1   -   the payment is made at the beginning of the period

If the [type] argument is omitted, it takes on the default value of 0 (denoting payments made at the end of the period).

Cash Flow Convention :

Note that, in line with the general cash flow convention, outgoing payments are represented by negative numbers and incoming payments are represented by positive numbers. This is seen in the examples below.

Excel Pmt Function Examples

In each of the examples below, the spreadsheet on the left shows the format of the Pmt function, and the spreadsheet on the right shows the result.


Example 1

The following spreadsheet shows the Excel Pmt function used to calculate the monthly payments on a loan of $50,000 which is to be paid off in full after 5 years. Interest is charged at a rate of 5% per year and the payment to the loan is to be made at the end of each month.

 Formulas:
Example of use of the Excel Pmt Function
 Results:
Excel Pmt Function Result

Note that in this example :


Example 2

In this example, the spreadsheet below shows the Excel Pmt function being used to calculate the quarterly payments on a loan of $10,000 that is to be reduced to $5,000 over a period of 2 years. Interest is charged at a rate of 3.5% per year and the payment is to be made at the beginning of each quarter.

 Formulas:
Example of use of the Excel Pmt Function
 Results:
Excel Pmt Function Result

Note that, in this example :


Further examples of the Excel Pmt function can be viewed on the Microsoft Office website.


Pmt Function Errors

If you get an error from the Excel Pmt function, this is likely to be one of the following:

Common Errors
#NUM! - Occurs if the supplied value of nper is equal to 0
#VALUE! - Occurs if any of the supplied arguments are not recognised as numeric values

Also, the following problem is encountered by some users:

Common Problem

The result from the Excel Pmt function is much higher or much lower than expected.

Possible Reason

Many users, when calculating monthly or quarterly payments, forget to convert the interest rate or the number of periods to months or quarters.

Solve this problem by ensuring that the rate and the nper arguments are expressed in the correct units. i.e. :

months = 12 * years; monthly rate = annual rate / 12
quarters = 4 * years; quarterly rate = annual rate / 4
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