# Excel Tip: Calculating Interest

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Microsoft Excel is an ideal tool for calculating the cost of borrowing money, but are you doing so in the most efficient manner? In this article, I'll describe how you can use the CUMIPMT function to calculate interest expense for a loan, whether for a month, a year, or the length of the loan - all within a single worksheet cell. I'll also show you how to add an amortization schedule to any workbook with just a couple of mouse clicks.

Before I describe the CUMIPMT function, let's first take a look at the PMT function, which calculates the payment amount for a loan. PMT has 3 required and 2 optional arguments:

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### Replies

By rajesh
Jun 26th 2015 01:11

thanks for this advice ...now no more salute to any banker......

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By Al
Jun 26th 2015 01:11

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By MIlan
Jun 26th 2015 01:11

thanks :)

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By Abhi
Jun 26th 2015 01:11

Very clear. Thanks a lot. I am able to create my own sheet now

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By Jason
Jun 26th 2015 01:11

Is the result the present value of the interest cost over the life of the loan? Or is it the future value (at the end of the loan) of all of the interest accumulated over the life of the loan? Do I need to do an additional adjustment find the present value? Thanks for this explanation.

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By David Ringstrom
to johnoneil
Jun 26th 2015 01:11

Jason,

Great question! Yes, CUMIPMT does return the present value of the interest earned over the life of the loan. To prove it out, right-click on any worksheet in Excel, choose Insert, and then double-click on Loan Amortization in the Spreadsheet Solutions tab. This will add an amortization table to your workbook, and you can run the same numbers as you used with CUMIPMT to see that the results are the same.

David

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to lobrien
Jun 26th 2015 01:11

What about if the loan with the interest will be due on the date given and the borrower does not paid for the remaining amount on that date, what would be the formula to get the penalty for the existing days/month?

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By Sunil Fulara
Jun 26th 2015 01:11

I WANT THE SAME FOR CALCULATION HOW TO CALCULATE

Details
of Projected Interest Expense

Actual
Projected

Month
Week 1
Week 2
Week 3
Week 4
Week 1
Week 2
Week 3
Week 4

Particulars
Oct-14
Nov-14
Nov-14
Nov-14
Nov-14
Dec-14
Dec-14
Dec-14
Dec-14

Interest expense(Gross)

Other borrowing costs

Total
-
-
-
-
-
-
-
-
-

Less: Interest capitalised

Interest Expense(Net)
-
-
-
-
-
-
-
-
-

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By john
Jun 26th 2015 01:11

if I know the cost(3,915) and the principal (19,800) what is the actual interest for 2.5 years?

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By David Ringstrom
Jun 26th 2015 01:11

To solve this I'd ideally need the interest rate and the term of the loan, but I can figure out with just one of those pieces of information. If you don't have either then I can't give you an accurate response.

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Jun 26th 2015 01:11

What about if the loan with the interest will be due on date given and the borrower does not paid for the remaining amount on that date, what would be the formula to get the penalty for the existing days/month?

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By David Ringstrom
Jun 26th 2015 01:11

In that case the borrower isn't paying down principal any more, they're simply accruing interest on the unpaid balance. One approach would be to take the interest rate and divide it by 365. Multiply that figure by the unpaid balance times the number of days that the loan is past due. So on an unpaid balance of \$10,000 at 4.5% interest of \$55.48 would be due when the balance is 45 days old. There are lots of different ways to write a loan contract, so make sure you review the promissory note to determine treatment of missed payments or balloon balances.

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By Lori
Jun 26th 2015 01:12

How can a balloon payment be included in CUMIPMT calculation? I am looking for the total interest amount for loan with regular monthly payments and balloon at the end. Thanks so much for any advice.

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May 5th 2016 19:32

Good Afternoon,
Is it possible to show how this can be done using rule 78 to calculate the inst amount?

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