What Is PMT Function in 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. Most people learn this as a sequence of clicks and forget it by next week; learning it as a pattern instead is what lets you apply it to the next, slightly different version of the problem without starting from scratch. That is the difference this page is trying to make. For “what is pmt function in excel”, the reliable version is a short checking loop, not just the first command that appears to work. Run it on a deliberately small range first, watch how the affected formula change, and only then apply the same setup to the full sheet. 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. That is what makes a calculation you can defend to a CFO or an auditor useful in real work: repeatable, auditable, and not dependent on memory or luck.

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. One habit worth forming early: name the cells that hold your inputs, so the formula reads in plain language instead of a string of cell addresses. A reviewer — or you in three months — can then follow the logic without decoding what B7 and D2 were supposed to mean, which is most of what makes a sheet maintainable.

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. Keep this page bookmarked for the next time the same question comes up. Better still, rebuild the example once in your own sheet — doing it yourself, with the tool above to check against, is what turns a copied formula into a technique you own. If you take one thing from this page on “what is pmt function in 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