How to Use PV Function in Excel (Find Present Value)

Hello friends! Today we complete the family of loan formulas with PV() function in Excel!

What is PV? It stand for "Present Value". If you know you can pay $200 every month for 5 years, PV will tell you exactly how much total money you can borrow right now. Very good to know before you go shopping for a car!

🛠️ How to write PV Function

To use PV, you need 3 things: the interest rate, how many months you want to pay, and how much money you can pay every month.

Formula Syntax:

=PV(rate, nper, pmt)

• rate: Interest rate from bank (Must divide by 12 for monthly rate!).
• nper: Total number of months you will pay. (Example: 5 years = 60 months).
• pmt: The money you pay every month. (Must be negative - number!).

📊 Short & Clear Example

Imagine you want to buy a car. You know you can only pay $200 every month (This is PMT). Bank says you can pay for 5 years (This is NPER). Bank charge 6% interest per year (This is Rate). How much money can you borrow today to buy the car? Let's check!

Formula for Present Value (How much you can borrow):

=PV(B1/12, B2*12, B3)

• Result: $10,345.11
• What it means? It means with your $200 a month budget, you can borrow $10,345.11 today from the bank to buy your car!
• Why divide and multiply by 12? Because you pay every month! So yearly rate 6% must divide by 12, and 5 years must multiply by 12 months.

Check out my Advance Loan Calculator Tool to calculate loan payment easily!

💡 Easy Pro Tips

1. Don't Forget Minus: Again, your monthly payment (pmt) MUST have minus sign (-). If you forget, your result will become negative!
2. Investment Goal: You can use PV for investment too! If you want to get $500 a month from bank later, PV tell you how much money you must put in bank today.
3. The Financial Family: PV is brother to PMT, NPER, and RATE. If you know any 3 pieces, Excel will always find the 4th piece for you!

📚 Useful Resources

• How to Use PMT Function in Excel (Calculate Loan Easy)
• How to Use NPER Function in Excel (Calculate Loan Time)
• How to Use RATE Function in Excel (Find Hidden Interest)