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Time Value of Money

Loan Payment (PMT)

PMT = PV × [r(1+r)^n] ÷ [(1+r)^n - 1]

What It Means

Calculate the periodic payment on a loan. PV = loan amount, r = periodic interest rate, n = number of payments.

Example

Loan Amount (PV):$200,000
Annual Rate:6% (0.5% monthly)
Term:30 years (360 payments)

$200,000 × [0.005(1.005)^360] ÷ [(1.005)^360 - 1]

PMT = $1,199.10 per month

Monthly payment on a $200k mortgage at 6% for 30 years

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