To calculate the total interest paid on a loan using the PMT function in Google Sheets, you need to follow these steps:
- Open a new or existing Google Sheets document.
- In a cell, enter the loan amount. For example, if the loan amount is $10,000, enter "=10000".
- In another cell, enter the annual interest rate as a decimal. For example, if the interest rate is 5%, enter "=0.05".
- In another cell, enter the loan term in years. For example, if the loan term is 5 years, enter "=5".
- In another cell, use the PMT function to calculate the monthly payment. The syntax is "=PMT(rate, nper, pv)".
- "rate" is the monthly interest rate, calculated by dividing the annual interest rate by 12. For example, if the annual interest rate was 5%, the monthly rate would be "=0.05/12".
- "nper" is the total number of payments, calculated by multiplying the loan term by 12 (since there are 12 months in a year). For example, if the loan term was 5 years, the number of payments would be "=5*12".
- "pv" is the present value or the loan amount. Refer to the cell containing the loan amount. For example, if the loan amount is in cell A1, the formula would be "=PMT(A2/12, A3*12, A1)".
- The cell will display the monthly payment amount as a negative value since it represents an outgoing cash flow.
- Calculate the total interest paid by multiplying the monthly payment by the number of payments and subtracting the loan amount. This can be done in another cell using the formula "=-(A412A3) - A1".
- The cell will display the total interest paid. The negative sign represents the amount paid in interest.
Note: Ensure that the formatting of the cells is set to display currency to make the values more readable.