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CUMPRINC Function

Calculates the cumulative principal paid on a loan taken or an investment made

What is the CUMPRINC Function?

CUMPRINC Function is a Financial function. The function helps calculate the cumulative principal paid on a loan taken or an investment made. Most of the times, CUMPRINC and CUMIPNT are used together.

 

Formula

=CUMPRINC(rate, nper, pv, start_period, end_period, type)

 

The CUMPRINC function uses the following arguments:

  1. Rate (required argument) – It is the rate of interest per period.
  2. NPER (required argument) – It is the total number of payment periods for which the loan or investment is to be paid.
  3. PV (required argument) – It is Present Value of the loan/Investment.
  4. Start_period (required argument) – It is the number of the first period over which the interest is to be calculated. It needs to be an integer between 1 and the specified NPER.
  5. End_period (required argument) – It is the last period over which interest is to be calculated. It must be an integer between 1 and the specified NPER.
  6. Type (required argument) – It is the timing of the payment. It can be 0 or 1. It is an integer that specifies if the payment is made at the start of the period (0) or at the end of the period (1).

 

How to use the CUMPRINC Function in Excel?

To understand the uses of the CUMPRINC function, let us consider a few examples:

 

Example 1

Let’s assume we took a $50,000 loan that needs to be paid over 5 years. Interest charged by the bank is the 5% and we are required to make monthly payments. First, we need to arrange the data in such a manner that it becomes easier to apply the formula and avoid errors.

 

CUMPRINC Function

 

We will do the same for all years. As seen in the screenshot above, the start and end periods change for each year. To avoid errors, we can use a formula. I used the following formula for the start_period:

 

CUMPRINC Function - Example 1

 

For the end_period, I used the following formula:

 

CUMPRINC Function - Example 1a

 

As seen above, the interest rate charged is on a per annum basis so we need to convert them into a monthly rate (5%/12). This is the period rate in our table above.

Also, the total number of payments is 60, as we will be making monthly payments.

Let’s see how this formula can be used in the given scenario:

 

CUMPRINC Function - Example 1b

 

We get the results below:

 

CUMPRINC Function - Example 1c

 

The calculated interest payments are negative values as it represents outgoing payments for the person who took the loan.

Often, this formula will give very or very low results. It generally happens when we forget to convert the annual interest rates or the number of periods to months or quarters as required.

To avoid errors, we need to make sure that we are consistent with the units used for specifying rate and nper.

 

Example 2

With same data as above, let us see how the results would change if we were required to make quarterly payments. Now, as we need to make quarterly payments, the number of periods per year will change to 4.

The table will look like below:

 

CUMPRINC Function - Example 2

 

The formula to use will be:

 

CUMPRINC Function - Example 2a

 

We will get the following results:

 

CUMPRINC Function - Example 2b

 

Few notes about the CUMPRINC Function

  1. #NUM! error occurs in the following scenarios:
    1. When the given start_period or end_period is less than or equal to zero.
    2. When the given start_period is greater than the end_period.
    3. When any of the given argument, that is rate, nper or PV, is less than or equal to zero.
    4. The argument type is not equal to 0 or 1.
  2. #VALUE! error – Occurs when any of the given arguments is a non-numeric value or is not recognized as a numeric value by Excel.

 

Click here to download the sample Excel file

 

Additional resources

Thanks for reading CFI’s guide to important Excel functions! By taking the time to learn and master these functions, you’ll significantly speed up your financial analysis. To learn more, check out these additional resources:

  • Excel Functions for Finance
  • Advanced Excel Formulas Course
  • Advanced Excel Formulas You Must Know
  • Excel Shortcuts for PC and Mac

Free Excel Tutorial

To master the art of Excel, check out CFI’s FREE Excel Crash Course, which teaches you how to become an Excel power user.  Learn the most important formulas, functions, and shortcuts to become confident in your financial analysis.

 

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