Excel IPMT Function
The Excel IPMT function to figure out the interest payment of a given period in an investment or loan, based on periodic, constant payments and constant interest rate in Excel.
IPMT(rate, per, nper, pv, [fv], [type])
(1) Rate: Required. It’s the interest rate per period.
The rate must be consistent with payment periods. If the annual interest rate is 6%, you can change it as follows:
- For semi-annual payments, you need to convert it to semi-annual interest rate: 3% (=6%/2);
- For quarterly payments, you need to convert it to quarterly interest rate: 1.5% (=6%/4);
- For monthly payments, you need to convert it to monthly interest rate: 0.5% (=6%/12).
(2) Per: Required. It’s the specified period that you will figure out the interest payment for. It’s must be in the range 1 to Nper.
(3) Nper: Required. It’s the total number of payment periods.
Most of time, you can get the information of the life of an investment or loan, and the payment frequency. For example, there is a 3-year investment, and you can figure out the total number of payment periods as follows:
- For semi-annual payments, the total number of periods is 6 (=3*2);
- For quarterly payments, the total number of periods is 12 (=3*4);
- For monthly payments, the total number of periods is 36 (=3*12).
(4) Pv: Required. It’s the present value, or the lump-sum amount that a series of future payments are worth at present.
(5) Fv: Optional. It’s the future value, or a cash balance you want to attain after the last payment is made. If omitted, it will be taken as 0.
(6) Type: Optional. A value indicates the time of payment. There are two types:
- 0 or omitted: payment at the end of every period;
- 1: payment at the beginning of every period.
The IPMT function returns the interest payment for the specified period for an investment or load, based on periodic, constant payments and a fixed interest rate.
(1) The rate must be consistent with payment periods.
(2) For cash out, the pv value and fv value should be negative numbers; for cash received, the fv value and pv value should be positive.
(3 The IPMT function returns #NUM! error value, if the nper value is less than 0.
(4) The IPMT function returns #NUM! error value, if the per value is less than 1 or greater than nper value.
(5) The IPMT function returns #VALUE! error value, if any of the supplied argument are non-numeric.
Example 1: Calculate monthly interest payments on a credit card in Excel
For example, you sign a credit card installment agreement, and you will pay your bill of $2,000 in 12 months with annual interest rate of 9.6%. In this example, you can apply the IPMT function to calculate the interest payment per month easily. Click to read more...
Example 2: Calculate quarterly interest payments for a loan in Excel
Supposing you have a loan of $10,000 from your bank, and the loan rate is 8.5%. From now on you need to pay back the loan in quarterly installment in 2 years. Now you can also apply the IPMT function to calculate the interest payment per quarter easily in Excel. Click to read more...
Example 3: Calculate semi-annual interest payments on a car loan in Excel
Assume you are going to buy a car with a bank loan. The amount of this bank loan is $50,000, its interest rate is 6.4%, you will repay the loan twice at the end of every half year, and the life of this bank loan is 5 years. In this case, you can easily figure out how much interest you will pay semi-annually easily with the IPMT function in Excel. Click to read more...
Example 4: Calculate total interest paid on a loan in Excel
Sometimes, you may want to calculate the total interest paid on a loan. For periodic, constant payments and constant interest rate, you can apply the IPMT function to figure out the interest payment for every period, and then apply the Sum function to sum up these interest payments, or apply the CUMIPMT function to get the total interest paid on a loan directly in Excel.
For example, you have a loan of $5,000 with annual interest rate of 8.00%. Now you need to repay it monthly in half year. Click to read how to figure out the total interest paid.