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PMT, one of the financial functions, calculates the payment for a loan based on constant payments and a constant interest rate.
 Use the Excel Formula Coach to figure out a monthly loan payment. At the same time, you'll learn how to use the PMT function in a formula. SyntaxPMT(rate, nper, pv, [fv], [type]) Note: For a more complete description of the arguments in PMT, see the PV function. The PMT function syntax has the following arguments:
Remarks
Tip To find the total amount paid over the duration of the loan, multiply the returned PMT value by nper. ExampleCopy the example data in the following table, and paste it in cell A1 of a new Excel worksheet. For formulas to show results, select them, press F2, and then press Enter. If you need to, you can adjust the column widths to see all the data.
Need more help?What Is a Loan Agreement?A loan agreement, sometimes used interchangeably with terms like note payable, term loan, IOU, or promissory note, is a binding contract between a borrower and a lender that formalizes the loan process and details the terms and schedule associated with repayment. Depending on the purpose of the loan and the amount of money being borrowed, loan agreements can range from relatively simple letters that provide basic details about how long a borrower has to repay the loan and what interest will be charged, to more elaborate documents, such as mortgage agreements. Regardless of the type of loan agreement, these documents are governed by federal and state guidelines to ensure that the agreed-upon interest rates are both reasonable and legal. Why Is a Loan Agreement Important?
Loan agreements are beneficial for borrowers and lenders for many reasons. Namely, this legally binding agreement protects both of their interests if one party fails to honor the agreement. Aside from that, a loan agreement helps a lender because it:
Borrowers benefit from loan agreements because these documents provide them with a clear record of the loan details, like the interest rate, allowing them to:
When You Can Use a Loan AgreementGenerally speaking, loan agreements are beneficial any time money is borrowed because it formalizes the process and produces results that are usually more positive for all parties involved. Though they are helpful for all lending situations, loan agreements are most commonly used for loans that are paid back over time, like:
Loan Agreements vs. Promissory NotesWhile promissory notes have a similar function and are legally binding, they are much simpler and more closely resemble IOUs. In most cases, promissory notes are used for modest personal loans, and they usually:
Conversely, loan agreements usually:
Get Free Bids to CompareLeverage our network of lawyers, request free bids, and find the right lawyer for the job. Get Bids Now What Should a Loan Agreement Include?Loan agreements typically include key details about the transaction, such as the: Loan AmountThe loan amount refers to the amount of money that the borrower is receiving. Interest rateInterest is used by lenders to compensate for the risk of lending money to the borrower. Usually, interest is expressed as a percentage of the original loan amount, also known as the principal, that is then added to the amount loaned. This extra money charged for the transaction is set at the signing of the contract, but it can be instated or increased if a borrower misses or makes a late payment. Additionally, lenders can charge compound interest where the principal amount is charged with interest as well as any interest that has accumulated in the past. The result is an interest rate that slightly increases over time. Length of the ContractThe life of a loan agreement is usually dependent on what is known as an amortization schedule , which determines a borrower's monthly payments. The amortization schedule works by dividing the amount of money being loaned by the number of payments that would need to be made for the loan to be paid back in full. After that, interest is added to each monthly payment. Though each monthly payment is the same, a majority of the payments made early in the schedule go toward interest, while most of the payment goes toward the principal later in the schedule. Unless there are early repayment penalties associated with the loan, it's typically in a borrower's best interest to pay back the loan as quickly as possible because it reduces the amount of interest owed. Method of PaymentThe payment method details how the borrower plans to pay the lender. This can be through:
Repayment ScheduleThere are two types of loan repayment schedules:
Late or Missed PaymentsMost loan agreements provide the actions that can and will be taken if the borrower fails to make the promised payments. When a borrower pays off a loan late, the loan is breached or considered in default and they could be held liable for any losses that the lender suffered because of it. Aside from the lender having the right to pursue compensation for liquidated damages and legal costs, they can:
Borrower and Lender DetailsKey details about the borrower and lender must be included in the loan agreement, such as their:
Depending on the loan and its purpose, the borrower and/or lender can either be a corporation or an individual. Important Legal Terms Found in Loan AgreementsSome of the key terms you should know and understand are:
It is in the best interest of both borrowers and lenders to obtain a clear and legally binding agreement regarding the details of the transaction. Regardless of whether the loan is between friends, family, or major corporations, when you take the time to develop a comprehensive loan agreement, you end up avoiding plenty of frustration in the future. Which document spells out the conditions of the loan repayment including the interest rate term and payment schedule?The promissory note (the legal document you signed to get your loan) is your promise to pay and spells out terms for repayment.
In which document would you find the terms of the loan including the payment and rate of interest quizlet?(The promissory note is the evidence of the debt and obligates the borrower to repay the loan. All of the terms and conditions that relate to payment of the debt; interest rate, loan amount, payment are all contained in the promissory note.)
Which document is evidence of a debt and specifies the terms?A form of debt instrument, a promissory note represents a written promise on the part of the issuer to pay back another party. A promissory note will include the agreed-upon terms between the two parties, such as the maturity date, principal, interest, and issuer's signature.
What document indicates the amount and terms of the loan and what the lender can do if the borrower fails to make payments?Mortgage note: This document states your promise to repay the mortgage. It indicates the amount and terms of the loan and what the lender can do if you fail to make payments.
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