Excel works with a variety of data, including financial information. It’s often useful to calculate the interest rate of a loan, for example. Fortunately, Excel can perform this math for you. Let’s learn how to use RATE in Microsoft Excel.
How to Use RATE in Excel
Imagine that you have a loan, and you need to know the annual interest rate for it. These calculations can be done manually, but with Excel’s RATE function, you don’t have to do so.
To use RATE, you’ll need three inputs: the amount of your loan, the monthly payment, and the number of periods in the loan.
For example, here, we’ll use $10,000 as the loan amount, $185 as the monthly payment, and 72 as the number of periods. Place these numbers in cells A1, A2, and A3, respectively.
Then, click into any empty cell in your workbook. Begin by typing an = sign. This tells Excel that you’re inputting a formula into the cell. Then, insert your RATE function. Your formula so far reads:
Excel will first need the number of periods. Click into cell A3, then type a comma. Next, click into cell A2 to add the monthly payment amount. Add a final comma, then type a – sign. To find the rate, you’re subtracting the loan amount inside the function.
Click into cell A1, then type ). Now, your formula is:
Finally, to find the annual rate, multiply the function by 12:
Hit Enter on your keyboard, and Excel will return the annual interest rate: 9.95%.
As you can see, Excel’s RATE function makes it quick and easy to calculate interest rates. You need only three simple inputs, and your spreadsheets with this function inside will quickly do the calculations for you. It’s the perfect way to save time and maintain perfect accuracy.