You can calculate monthly interest on a loan in Excel using the PMT function. This function calculates the payment for a loan based on constant payments and a constant interest rate.
Here's how to use the PMT function:
- Enter the loan details: In separate cells, enter the loan amount, the annual interest rate, and the loan term in months.
- Apply the PMT function: In a new cell, type
=PMT(, then select the cell containing the annual interest rate divided by 12 (to get the monthly interest rate), followed by the loan term in months, and finally the loan amount. Close the parenthesis and press Enter.
For example, if your loan amount is $10,000, the annual interest rate is 5%, and the loan term is 60 months, the formula would be: =PMT(5%/12,60,10000). The result will be the monthly payment, which includes both principal and interest.
To calculate only the monthly interest, you can use the following formula:
= (Loan Amount * Annual Interest Rate) / 12
This formula calculates the interest based on the loan amount and the annual interest rate, then divides it by 12 to get the monthly interest.
Example:
- Loan amount: $10,000
- Annual interest rate: 5%
- Loan term: 60 months
Monthly interest calculation:
= (10000 * 0.05) / 12 = $41.67
Practical Insights:
- You can use Excel's built-in functions to easily calculate monthly interest.
- Ensure you divide the annual interest rate by 12 to get the monthly interest rate.
- The PMT function calculates the total monthly payment, which includes both principal and interest.
- To calculate only the monthly interest, use the formula
= (Loan Amount * Annual Interest Rate) / 12.
