How to Calculate an Interest Payment with Microsoft Excel

Table of contents:

How to Calculate an Interest Payment with Microsoft Excel
How to Calculate an Interest Payment with Microsoft Excel
Anonim

This article explains how to calculate the interest amount using a Microsoft Excel formula. You can use the Windows or Mac version of Excel.

Steps

Calculate an Interest Payment Using Microsoft Excel Step 1
Calculate an Interest Payment Using Microsoft Excel Step 1

Step 1. Launch Microsoft Excel

Double-click the corresponding icon with a white "X" on a dark green background.

Calculate an Interest Payment Using Microsoft Excel Step 2
Calculate an Interest Payment Using Microsoft Excel Step 2

Step 2. Click on the Blank Workbook option

It is located in the upper left of the main Excel screen. A new sheet will be created in which you can calculate the interest amount of the loan you want to request.

If you are using a Mac, skip this step

Calculate an Interest Payment Using Microsoft Excel Step 3
Calculate an Interest Payment Using Microsoft Excel Step 3

Step 3. Set the data

Enter in the sheet the descriptions of the data that represent the details of the loan you need following this scheme:

  • Cell A1 - enter the text Financed capital;
  • Cell A2 - type Interest rate:
  • Cell A3 - enter the words Number of installments;
  • Cell A4 - enter the text Interest amount.
Calculate an Interest Payment Using Microsoft Excel Step 4
Calculate an Interest Payment Using Microsoft Excel Step 4

Step 4. Enter the total amount of the loan

Inside the cell B1 type in the principal amount you want to borrow.

For example, if you want to buy a boat worth € 20,000 by paying an advance of € 10,000, you will have to enter the value 10,000 in the cell B1.

Calculate an Interest Payment Using Microsoft Excel Step 5
Calculate an Interest Payment Using Microsoft Excel Step 5

Step 5. Enter the interest rate currently in effect

Inside the cell B2, type in the percentage of interest that is applied to the loan.

For example, if the interest rate is 3%, enter the value 0.03 in the cell B2.

Calculate an Interest Payment Using Microsoft Excel Step 6
Calculate an Interest Payment Using Microsoft Excel Step 6

Step 6. Enter the number of installments you will need to pay

Write the number in the cell B3. If your loan is for 12 months, you will need to type the number 12 into the cell B3.

Calculate an Interest Payment Using Microsoft Excel Step 7
Calculate an Interest Payment Using Microsoft Excel Step 7

Step 7. Select cell B4

Simply click on the cell B4 to select it. In this point of the sheet you will enter the Excel formula that will automatically calculate the total amount of interest using the data you just provided.

Calculate an Interest Payment Using Microsoft Excel Step 8
Calculate an Interest Payment Using Microsoft Excel Step 8

Step 8. Enter the formula for calculating the interest amount of your loan

Enter the code

= IPMT (B2, 1, B3, B1)

inside the cell B4 and press the Enter key. This way Excel will automatically calculate the total amount of interest you will have to pay.

This formula does not work for calculating the amount of interest in the case of a loan with a compound interest rate, since in this scenario the interest is decreasing as the loan is paid off. To calculate the amount of compound interest, simply subtract the amount of each installment paid from the financed capital and update the value of the cell B4.

Recommended:

How to Calculate the Implied Interest Rate

How to Calculate the Implied Interest Rate

An implied interest rate represents the nominal interest rate that is implied when you borrow a fixed amount of money and return a different amount of money in the future. For example, if you borrow $ 100,000 from your brother and promise him to pay him back the same amount plus an extra $ 25,000 over 5 years, you are paying an implicit interest rate.

How to Calculate the Effective Interest Rate

How to Calculate the Effective Interest Rate

When analyzing a loan or investment, you may find it difficult to clearly understand the true cost of the loan or the true return on the investment. There are several terms that are used when talking about the interest rate or return, including annual percentage return, annual rate, effective, nominal, and more.

How to Calculate Interest Rate: 10 Steps

How to Calculate Interest Rate: 10 Steps

If you know the value of the financed capital and the interest you can pay, you can calculate the maximum interest rate you are willing to accept; you can also consider the annual interest payments to know the percentage. This is a simple calculation that allows you to save money when making financial decisions.

How to Calculate Total Interest Paid on a Car Loan

How to Calculate Total Interest Paid on a Car Loan

Calculating the total interest you have to pay for a car loan can be a difficult and daunting task. The article tries to clarify the procedure to follow for this important operation. Steps Step 1. Find the amount that needs to be financed This value is called “financed capital” and is the starting figure for developing the calculations.

How to Calculate Credit Card Interest with Excel

How to Calculate Credit Card Interest with Excel

The annual interest rate of credit cards is notoriously high. Although most consumers prefer to reduce or even eliminate the debt accumulated on them, it still remains a fairly common item in family budgets. Here's how to calculate a credit card interest rate using Excel, so you can estimate how much you would save by lowering or eliminating debt, or by switching to a lower-rate credit card.