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The Interest Rate Function in Excel

Figure 1. of Interest Rate Calculation in Excel.

The Interest Rate Function in Excel allows us to calculate per period of a loan.

In this post, we are going to walk through the usage and formula syntax of the Rate Function in Excel.

Generic Formula

=PMT(rate,periods,-amount)

The components of the operation syntax for the PMT Function are as follows;

  • nper – the number of monthly durations/periods.
  • rate – Interest Rate per duration.
  • pv – the initial loan amount.

How to use Calculate the Interest Rate for a Loan in Excel.

To determine the amount due for loan payment, given a loan duration/term, a Rate of Interest, and the initial loan amount, we can utilize the Excel PMT Operation Syntax..

In the example illustrated below, the operation syntax inserted into the formula bar of cell B6 is thus-

=PMT (B3/12,B2,-B1)

This calculates the monthly payment with interest for the loan.

Figure 2. of Excel PMT Function.

Loans consist of 4 basic parts. The Loan amount, Rate of Interest, the loan duration (number of regular payments), and an amount to be paid per period. We can use the Excel PMT Function to calculate the payment amount when we have all four components.

Figure 3. of Final Result.

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Another blog reader asked this question today on Excelchat:
Here are some problems that our users have asked and received explanations on

I have a problem regarding to Calculate interest rate for loan
Solved by Z. E. in 22 mins
Calculate, in cell D20, the interest amount for period 1 by multiplying the balance in period 0 (cell F19) by the loan interest rate (cell C13) divided by 12. Dividing the interest rate by 12 results in the monthly interest rate. This formula is reusable. The interest for a given period is always the monthly interest rate times the balance from the previous period. [3 points]
Solved by X. W. in 16 mins
Month Amount Borrowed or (Repaid) Loan Balance at the End of the Month Annual Prime Rate for the Month Effective Interest Rate per Month Interest Expense January $80,000.00 4.00% February $50,000.00 4.25% March $(30,000.00) 4.50% April $20,000.00 4.25%
Solved by Z. U. in 12 mins

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