The PPMT function in Google Sheets is a crucial financial tool designed to calculate the principal payment of an investment over a set period of time. It is particularly useful for individuals managing loans or mortgages, allowing them to see how much of each payment goes toward paying off the principal versus interest.

Syntax

=PPMT(rate, period, total_periods, present_value, [future_value], [type])

• rate: The interest rate for each period.
• period: The specific period for which you want to find the principal payment.
• total_periods: The total number of payment periods in the investment.
• present_value: The current value or principal amount of the investment.
• future_value (optional): The desired balance after the last payment is made. Default is 0.
• type (optional): Indicates when payments are due; 0 for end of the period, 1 for the beginning. Default is 0.

Example #1

=PPMT(0.05/12, 1, 12, 10000)

This function computes the principal portion of the first payment for a loan of $10,000 with a monthly interest rate of 5%. Result: -$850.25.

Example #2

=PPMT(0.04/12, 6, 60, 50000)

This example calculates the principal amount of the sixth payment on a loan of $50,000 at an annual interest rate of 4%. Result: -$911.52.

Example #3

=PPMT(0.07, 3, 5, 20000, 0, 1)

This call evaluates the principal payment of the third payment on a $20,000 loan at a 7% annual interest rate, due at the beginning of the period. Result: -$4,740.56.

Error handling

• NUM!: This error indicates that there’s a numeric issue within the function, such as when the total number of periods is less than one.
• VALUE!: This error occurs when one or more of the parameters are not numeric or valid.
• REF!: This error signifies that one of the input parameters refers to a cell that is not valid, typically after deleting the reference cell.

Conclusion

In summary, the PPMT function is an invaluable asset for anyone looking to manage their loans and investments more effectively. By calculating the principal payments accurately, users can develop a clearer understanding of their repayment schedule and make informed financial decisions.