How to use goal seek to solve for the interest rate behind a loan payment in excel
- Step 1Build a loan model — Set up: Principal (input), Rate (input cell to solve), Term, PMT = PMT(Rate/12, Term, -Principal).
- Step 2Set Goal Seek parameters — Target cell = PMT cell, target value = desired monthly payment (negative number for PMT), input cell = Rate cell.
- Step 3Run solver — The solver iterates to find the rate that produces the target payment.
- Step 4Convert to APR — Multiply the monthly rate by 12 to get the annual interest rate.
Frequently asked questions
Does Goal Seek work with the Excel PMT function?+
Goal Seek evaluates arithmetic formulas. For PMT, ensure the formula is expressed as a simple arithmetic expression in the target cell (monthly_payment = principal * rate / (1 - (1+rate)^-n)).
What precision can Goal Seek achieve?+
The solver converges to within 1e-8 residual error — sufficient precision for financial rate calculations.
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