Microsoft Office Tutorials and References
In Depth Information
Chapter 5: Calculating Loan Payments and Interest Rates
Chapter 5
Calculating Loan Payments
and Interest Rates
In This Chapter
Formatting monetary values
Estimating loan payments
Determining the number of payments
Calculating the number of periods
Calculating interest
Calculating the principal loan amount
A penny saved is a penny earned. A penny by itself is not much. But add
a little savings here and there over the life of a loan, and the sum could
be significant! Just think of what you can do with the extra money — extend a
vacation, give it to charity, or save it for a rainy day.
Taking out a car loan, a mortgage, or another type of loan involves planning
how you want to manage the loan payments. In the simplest terms, all you
may need to know is the amount of your monthly payment. But knowing the
components of a loan and being able to compare one loan with another can
help you to manage your financial resources in your own best interest.
Consider an auto loan, one of the most common loan types. The factors
involved include the cost of the vehicle, the down payment, the length of the
loan, and the interest rate. Excel can help you see how all these factors affect
your bottom line, letting you make the best decision (I would love to get a
Ferrari, but a Hyundai will have to do).
You can use the financial functions in Excel to crunch the numbers for your
loans. You supply these functions with the relevant numbers: the principal
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