Wednesday, January 22, 2014
So, how do you know what you can afford? Knowing what the Monthly Payments is, of course, key in making any informed decisions.
Using Excel for Payments:
As long as you have Excel loaded on your favorite laptop, you don’t have to be a financial wizard to quickly calculate what your payments will be. The PMT() function can calculate the monthly repayment using the following syntax:
PMT(AnnualInterestRate/12, NumberOfPayments, AmountOfLoan)
For example, let’s say you are considering purchasing a new Geekmobile for a bottom-line cost of $32,000. If your annual interest rate is 4%, on a 5-year (60 months) loan of $28,000, your formula would look like this:
=-PMT(0.04%, 60, 28000)
Note: A minus sign (-) was placed in front of the function in order to return a positive value (if you are like me, negative payment amounts just look odd…)
With your formula in place, hit Enter and, Alacazam, you have your monthly payment. If you don’t like the results, play around with the interest rate, the length of the loan, or maybe check out other auto-buying opportunities. PMT is a great little tool – Give it a try!