PMT Function Excel

What this does

PMT calculates the constant payment needed to repay a loan at a fixed rate over a fixed term. It is the single most-used financial function in spreadsheets and the entry point to every mortgage model. Two rules govern it. The rate and the period count must share a unit — an annual rate divided by 12 alongside a term in months. And the result is negative because it is money leaving you; entering the loan amount as negative, or wrapping the result in ABS, flips it for display. The optional fv argument covers loans with a balloon payment at the end. The same idea underpins a lot of everyday Excel work, so the few minutes spent getting it right here pay back across every sheet you build afterwards. Treat it as a pattern, not a one-off, and it stops being something you look up and starts being something you reach for. The difference between a quick fix and a sheet you can trust is the extra minute you spend validating “pmt function excel”. Start on a copy or a tiny sample, keep the affected formula visible, and compare the result with the tool above before you touch the real workbook. When a formula is involved, keep the inputs labelled beside it, reference cells instead of typing values, and apply number formatting only after the result checks out. The point is a calculation you can defend to a CFO or an auditor, but the practical win is that someone else can open the file and understand what happened without asking you.

A worked example

200,000 borrowed at 5 % annual over 25 years: =PMT(5%/12, 25*12, 200000) returns about -1,169.18 a month. To see what a shorter term costs, change 25 to 15 and the payment rises to roughly -1,581 — while total interest falls by more than half. A car lease with a 5,000 residual: =PMT(4%/12, 36, 25000, -5000). PMT is the answer to "what will this cost me a month", which is the question every borrowing decision actually turns on. If there is any chance you will reuse this, drop it into a small template tab right now: a labelled input area on the left and the formula beside it, checked once against the tool above. Next time the same question comes up, the answer is a single paste away instead of a rebuild from memory.

In Google Sheets

If you are in Google Sheets rather than Excel, the good news is that the formula shown here is identical and the workflow barely changes — menus sit across the top instead of in a ribbon, and a few function names differ slightly, but anything you build here moves across with little or no rework. The aim was to get you unstuck fast and leave you a little more capable than a copy-paste would. The answer is at the top, the tool proves it, and the detail above shows why it holds — so the next time a colleague asks, you can answer without reaching for search. If you take one thing from this page on “pmt function excel”, make it the habit rather than the keystrokes: set the problem up with labelled inputs, reference those cells, and let Excel do the recomputing. Bookmark the page for the syntax, but do the example once in a blank sheet and check it against the tool above — five minutes of hands-on practice fixes the method in memory far better than re-reading, and it surfaces the small snags while they are still harmless. After that the technique is genuinely yours: faster than searching for it again, and reliable enough to drop into work that other people depend on.

Common mistakes

• Passing an annual rate with a monthly term — the most common error with this function, and it produces a wildly wrong payment.
• Expecting a positive number; the sign is the cash-flow convention, not a fault.
• Forgetting that PMT covers principal and interest only — tax, insurance and fees are not in it.

Frequently asked questions