Calculate original loan amount

To calculate the original loan amount, given the loan term, the interest rate, and a periodic payment amount, you can use the PV function. In the example shown, the formula in C10 is:

=PV(C5/12,C7,C6)

Explanation

Loans have four primary components: the amount, the interest rate, the number of periodic payments (the loan term), and the payment amount per period. One use of the PV function is to calculate the original loan amount, when given the other 3 components.

For this example, we want to find the original amount of a loan with a 4.5% interest rate, and a payment of $93.22, and a term of 60 months. The PV function is configured as follows:

rate - The interest rate per period. We divide the value in C5 by 12 since 4.5% represents annual interest:

C5/12

nper - the number of periods comes from cell C7, 60 monthly periods in a 5-year loan.

pmt - The payment made each period. This is the known amount of $93.22, which comes from cell C6. By convention, payments in PV are input as negative values.

With these inputs, the PV function returns 5,000.226, which is displayed as $5000 using number formatting. The actual loan amount is $5000 even, but the monthly payment is rounded to the nearest penny causing FV to return a slightly different result.