PMT is short for “payment”, and is a function used to calculate the payment for a loan based on constant payments and interest rates.

The PMT function consists of:

**Rate**– interest rate**Nper**– number of payments for the loan**Pv**– present value

While the first three are required for the formula, the next two are optional:

**Fv**– future value (desired cash balance after the last payment is made)**Type**– indicates when the payments are due; 0 indicates the end of the period, while 1 indicates the beginning

So, the formula for a loan payment will look like this:

**=PMT(Rate,Nper,Pv, Fv, Type)**

Note that the last two are optional.

**Note: **For calculating monthly payments, divide the interest rate by 12. For loans that will take a number of years to pay, multiply the Nper by the number of years (e.g. for a 3-year payment, multiply Nper by 3).

**Example**

Enter the following data in Excel:

Where:

- Rate = 8%
- Nper is 10
- Pv = $10,000

To find the monthly payment for a loan with the given values, type the following in cell A5 to get your result:

**=PMT(A2/12,A3,A4)**

Or, if you want to find the same as above, but given that payments are due at the beginning of the period, then use this formula instead:

**=PMT(A2/12,A3,A4,,1)**