This function is important for financial analysis, particularly in managing loans and amortization schedules.
Example
Assume a 5-year loan for $10,000 with an annual interest rate of 5%.
Payments are monthly and there are 12 compounding periods per year.
You want to confirm the total principal paid over the full term of the loan.
As expected, this is the original loan amount.
The CUMPRINC returns a negative value because it represents an outflow of money.
In most cases, however, the main inputs will come from cell references.
Excel then calculates a value of 60 fornperbefore the CUMPRINC function runs.
Also, notice that the monthly payment isnotan input to CUMPRINC.
To calculate a payment for a loan directly it’s possible for you to use thePMT function.
The RATE function calculates by iteration.
