How to Calculate Loan Payoff

Loan payoffs are simple calculations that is required every time you take a loan from a bank or a financial institution. To prevent yourself from being cheated by others or to be able to help others with their loans, follow the steps below for the loan payoff calculation.

Step 1: Input the details of Loan Amount, number of years of loan repayment, Rate of Interest, and Period of Loan payment

  • Loan Amount: Principal amount borrowed
  • Years of Loan repayment: Total no. of years in which loan is completely repaid
  • Rate of Interest: Per annum interest on the principal amount
  • Period: The span during which the loan payment is made (Ex: Each month, each quarter etc.)

loan data

Here, no. of Periods = No. of Years * 12 (monthly repayment) = 10*12

Step 2: Calculate the Rate of interest per period.

For above figures, rate of interest per period = (8/12) % = 0.67%

rate of interest per period

Step 3: Calculate the loan payoff per period using excel PMT formula.

=PMT( Rate, Nper, Pv, Fv, Type)

  • Rate: Per period interest rate -
  • Nper: Total no. of periods - Pv: Initial Value of the loan (Has to be negative for PMT formula) -
  • Fv (optional): Fv stands for future value. If after paying off the last loan payment, you want to have any balance left it is the future value. Fv can be omitted (considered 0 if omitted) -
  • Type (optional)

             0: If payment is to be done at end of period

             1: If payment is to be done at beginning of period

pmt formula data

Loan payoff can be simply calculated by using the PMT formula and using the correct variables.

loan payoff per period