Calculate Loan Repayments in Excel: A Complete Step-by-Step Guide

Why Use Excel for Loan Repayment Calculations?

Are you looking to take control of your loan repayments and gain a clearer understanding of how your monthly payments add up over time? Whether you're planning to borrow or already managing a loan, our step-by-step guide will show you how to effortlessly calculate loan repayments in Excel. From using essential functions like PMT to creating charts that track your balance, we’ll guide you through the process with easy-to-follow instructions. Learn how to manage your finances smarter and visualise your repayment journey, all within a few clicks!

Step-by-Step Instructions for Calculating Loan Repayments

1. Prepare Your Spreadsheet

• Open your Excel spreadsheet.
• Input the following:
• Loan Amount: £10,000
• Interest Rate: 6%
• Repayment Period: 36 months

2. Input Loan Details

• Loan Amount:
  • Select the cell where you want to input the loan amount and type 10000.
  • Press Ctrl + Enter and then Ctrl + Shift + 4 to format it as pounds and pence.
• Interest Rate:
  • In the next cell, enter 6% for the rate.
• Repayment Period:
  • For the period, input 36 to represent the number of months.

3. Calculate Monthly Payments

• To calculate your monthly payments, use the PMT function:
1. In an empty cell, type:

   =PMT(rate/12, number_of_payments, present_value)

2. Use these cell references:
   • Rate: Cell containing the interest rate (B2)
   • Number of Payments: Cell containing 36 months (B3)
   • Present Value (Loan Amount): Cell containing £10,000 (B1)
3. Press Enter to calculate. Your monthly payment will display, but as a negative number.

4. Fix the Negative Sign

• To change the negative result to a positive figure:
• Add a minus sign (-) before the reference to the loan amount (B1) in the formula.
• This will convert the monthly payment to a positive number.

5. Calculate Total Amount Paid

• Multiply your monthly payment by the number of months to find the total amount paid.
• Example:

  Monthly Payment * 36 = Total Payment

  For a £10,000 loan at 6% APR, your total payment will be £10,951.90.

6. Create a Repayment Schedule Using SEQUENCE

• Use the SEQUENCE function to list the months (1 to 36):
1. Type:

   =SEQUENCE(36, 1, 1, 1)

2. Press Enter to generate the list.

7. Track Remaining Balance

• In a new column, label it Remaining Balance.
• Use this formula to calculate the balance after each payment:

1. =Starting_Balance - Monthly_Payment

2. Fix the reference for the monthly payment using F4 to make it absolute.
3. Autofill the formula down the column to track the balance reducing to zero.

8. Create a Chart

• Visualise your loan repayment by creating a chart:
1. Select the month and balance columns.
2. Go to Insert > Chart > Line Chart.
3. Now, you’ll be able to see how the balance decreases month by month.

Visualising Loan Repayments with Excel Charts

Once you've set up the repayment schedule, visualising your loan balance over time provides a clear picture of how your payments reduce the outstanding amount. A line chart in Excel can help you track progress month by month, making it easier to understand the financial impact.

Final Thoughts on Managing Loan Repayments

By using Excel functions like PMT and SEQUENCE, you can effectively manage your loan repayments. Calculating monthly payments, tracking balances, and visualising the repayment journey empowers you to stay on top of your finances. With these tools, handling your loan is just a few clicks away!