PMT is a financial function used to figure out the loan payments based on constant payments and a constant interest rate.
| P x | APR N | ||
| 1 - ( 1 + | APR N | )(-N x Y) |
P = Loan amount
APR = Annual percentage rate
N = Number of payments per year (monthly payment means 12 payments in a year)
Y = Term of the loan (number of years)
If the interest rate is equal to zero:
PMT = Loan amount ÷ Total number of payments
Example:
calculate the monthly payment for a loan of $100,000 at an annual rate of 6% and a 5-year term.
PMT =
| P x APR/ N |
| 1 - (1 + APR/N) (-N x Y) |
| 100,000 x 0.06÷12 |
| 1 - (1 + 0.06÷12) (-12 x 5) |
| 500 |
| 0.259 |
monthly payment = $1,933.28
total payment number = 12 x 5 = 60 payment
total payment = 60 x 1,933.28 = $115,996.809
total interest = 115,996.809 - 100,000 = $15,996.809