CALCULATE INTEREST OF LOAN
Learn To calculate the interest of any loan before taking a loan so that you can take an informed decision. Interest on a loan can become a major issue if not taken care off so it always makes sense to know how much interest will you pay on a loan.
i have used the IPMT formula to calculate the interest of the loan and here is a description for the IPMT formula from a microsoft support blog
Description
Returns the interest payment for a given period for an investment based on periodic, constant payments and a constant interest rate.
Syntax
IPMT(rate, per, nper, pv, [fv], [type])
The IPMT function syntax has the following arguments:
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Rate Required. The interest rate per period.
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Per Required. The period for which you want to find the interest and must be in the range 1 to nper.
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Nper Required. The total number of payment periods in an annuity.
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Pv Required. The present value, or the lump-sum amount that a series of future payments is worth right now.
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Fv Optional. The future value, or a cash balance you want to attain after the last payment is made. If fv is omitted, it is assumed to be 0 (the future value of a loan, for example, is 0).
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Type Optional. The number 0 or 1 and indicates when payments are due. If type is omitted, it is assumed to be 0.
|
Set type equal to |
If payments are due |
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0 |
At the end of the period |
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1 |
At the beginning of the period |
Remarks
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Make sure that you are consistent about the units you use for specifying rate and nper. If you make monthly payments on a four-year loan at 12 percent annual interest, use 12%/12 for rate and 4*12 for nper. If you make annual payments on the same loan, use 12% for rate and 4 for nper.
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For all the arguments, cash you pay out, such as deposits to savings, is represented by negative numbers; cash you receive, such as dividend checks, is represented by positive numbers.
Example
Copy the example data in the following table, and paste it in cell A1 of a new Excel worksheet. For formulas to show results, select them, press F2, and then press Enter. If you need to, you can adjust the column widths to see all the data.
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Data |
Description |
|
|
10.00% |
Annual interest |
|
|
1 |
Period for which you want to find the interest paid. |
|
|
3 |
Years of loan |
|
|
$8,000 |
Present value of loan |
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Formula |
Description |
Live Result |
|
=IPMT(A2/12, A3, A4*12, A5) |
Interest due in the first month for a loan with the terms in A2:A5. |
($66.67) |
|
=IPMT(A2, 3, A4, A5) |
Interest due in the last year for a loan with the same terms, where payments are made yearly. |
($292.45) |