When purchasing equipment or other items utilizing a loan, it is important to know how many payments it will take to pay off the item completely. Granted, loan information will often provide a minimum payment to pay off a loan over a set term; however, to maximize the amount of capital, it is important to know how much quicker a loan will be paid off with a higher payment.
In this recipe, you will learn to use payment functions to calculate the number of payments to pay off a loan amount, including interest.
We will begin by entering all applicable loan information into the appropriate cells of the worksheet:
1. In cell A6, enter the title, # of payments, and in cell B6, enter the formula =NPER(B4/12,B5,B3) and press the Enter key:
Excel now shows that it would take just over 47 months to pay off the loan with the current payment schedule.
A financial manager may now adjust the payment information in order to adjust the payment schedule...