The amount of interest you earn on a loan is known as accrued interest. It is, however, the Sum that has yet to be collected or paid. It accrues on loans such as a mortgage, savings accounts, student loans, and other investments. We can calculate accrued interest on a loan in Excel using several methods. For your better understanding, we will use a sample data set containing Loan amount, Yearly Interest Rate, Daily Interest Rate, Accrued Interest Period to Calculate Accrued Interest on a Loan for method 1. For method 2, we will use data set containing Loan Issue Date, First Interest Date, Settlement Date, Annual Interest Rate, Par Value, Frequency or Payment Mode, Basis Days, and Calculation Method.
Sample data set for method 1.
Sample dataset for methods 2 and 3.
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3 Simple Methods to Calculate Accrued Interest on a Loan in Excel
In this article we will see how to calculate accrued interest on a loan in Excel manually, using the ACCRINT function, and the ACCRINT function along with the DATE function.
Method 1: How to Calculate Accrued Interest on a Loan in Excel Manually
Let’s assume, we have a loan amount and a yearly interest rate is given. Now, we will see how to calculate accrued interest on this loan.
First, click on cell C6 and type the following formula.
Here, we are calculating the daily interest rate by simply dividing the yearly interest rate by the 365 number of days.
Now, press ENTER key. We will get our daily interest rate as follows.
Now, we have to multiply the Loan amount, Daily Interest Rate, and Accrued Interest Period. So that, we can get Monthly accrued Interest.
At this point, click on cell C9 and type the following formula.
Now, press ENTER key.
So, our monthly accrued interest rate for the given accrued period of 30 days and loan amount for $100,000 is $821.92.
Read more: How to Calculate Accrued Interest on Fixed Deposit in Excel
Method 2: How to Calculate Accrued Interest on a Loan in Excel Using ACCRINT
If we look at sample dataset 2, we will see that this accrual interest method is different. In Excel, the function ACCRINT looks like the following.
=ACCRINT(issue, first_interest, settlement, rate, par, frequency, [basis], [calc_method])
Issue: This is the date when a loan or security is issued
First_interest: This argument means the date when the interest payment will first occur.
Settlement: The date when the loan will finish
Rate: Annual or Yearly Interest rate
Par: The loan amount
Frequency: This is the annual number of loan payments. Annual payments will have a frequency of 1; semiannual payments will have a frequency of 2, and quarterly payments will have a frequency of 4.
Basis: This argument is optional. This is the type of day count used to calculate the interest on a certain loan or security. The base is set to 0 if the argument is omitted. Any of the following values can be used as the basis:
0 Or Omiited- US (NASD 30/360)
Calculation_method: It’s either 0 or 1 (calculates accrued interest from first interest date to settlement date). This argument is also optional.
Now, jump into the method.
First, click on cell C13 and type the following.
Now, press ENTER key.
So, here we go. The amount that will be accrued is $6416.67 for 11 months from January to December.
Here, If we simply, Excel is first calculating interest by Multiplying C7 and C8. As a result, we are getting $7000, further which is divided by 12 as the basis is 0 and we get $583.33. Finally, we are multiplying this $583.33 with 11 months from January to December.
Read more: How to Calculate Accrued Interest on a Bond in Excel
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Method 3: Calculate Accrued Interest on a Loan in Excel Using ACCRINT along with Date Function
So, what if, our Issue Date, First Interest Date, and Settlement Date, are not formatted in Date. Then we will simply use ACCRINT along with the DATE function to solve the issue.
First, click on cell C13 and type the following formula.
Now, Press ENTER key.
That’s all. Simple. The amount that will be accrued is $6416.67 for 11 months from January to December.
For method formula explanation go to method 2.
Read more: How to Calculate Interest Between Two Dates Excel
Things to Remember
We have to keep in mind certain things while doing these methods.
- The arguments for the first interest date and settlement date should be valid dates
- You have to be aware of different date systems or date interpretation settings.
- For Basis
|Basis||Day Count Basis||Defined Year||Year Count|
|0||Or Omiited- US (NASD 30/360)||360/30||12|
The single most crucial aspect in becoming accustomed to these quick approaches is practice. As a result, I’ve attached a practice workbook where you may practice these methods.
These are three different ways to calculate accrued interest on a loan in Excel. Based on your preferences, you may choose the best alternative. Please leave them in the comments area if you have any questions or feedback. You may also browse this site’s other Excel-related topics.