By: Shamima Sultana

In reply to Alade Israel.

Hello Alade Israel,

If the loan is for 6 months, you can calculate the simple interest on a reducing balance in Excel by following these steps:

Set up your columns: Create columns for Month, Beginning Balance, Interest, Principal Payment, and Ending Balance.
Calculate Interest: Use the formula:

=Beginning Balance * Interest Rate / 12
(assuming the interest rate is annual).

Calculate Principal Payment: If it’s an equal installment loan, subtract the interest from the monthly payment.
Update the Ending Balance:
=Beginning Balance – Principal Payment
Drag the formulas down for the 6 months.

Regards
ExcelDemy