Personal Lender Account

I made a simple interest personal loan to a friend from one checking account with payments being deposited to a checking account at another bank. The loan is about 80% paid off. However, I just started using Quicken 2020 and retroactively looking at ways of tracking this.

At the simplest level, it looks (to my novice eyes) like I should first create appropriate categories such as "Loan" and "Loan Repayment" for the source and destination accounts. Maybe this is all I need? I like the idea of keeping it simple.

After more reading (including https://www.quicken.com/support/set-loan-which-you-are-lender) I see a dedicated account is the recommended approach. But this leads to three questions:

(1) Is creating a dedicated lender acct worthwhile at this stage (loan almost paid off)?
(2) What's the best way to get old and upcoming transactions into the newly created loan account?
(3) How do I ensure my total net worth remains accurate?
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  • FYI: For (1) I meant the asset acct in Quicken (now that I have an idea what to call it). And yes, as indicated, this will be an interest bearing loan. Thanks for walking me through some of the details.
  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    @steppinwolf7,

    Glad I was able to help.  Take care & stay safe.

    Frankx

                      Quicken H&B-Subscription Ver. 34.24 - Windows 10-Home Version
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  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited March 2020
    I made a simple interest personal loan to a friend from one checking account with payments being deposited to a checking account at another bank. The loan is about 80% paid off. However, I just started using Quicken 2020 and retroactively looking at ways of tracking this.

    At the simplest level, it looks (to my novice eyes) like I should first create appropriate categories such as "Loan" and "Loan Repayment" for the source and destination accounts. Maybe this is all I need? I like the idea of keeping it simple.

    After more reading (including https://www.quicken.com/support/set-loan-which-you-are-lender) I see a dedicated account is the recommended approach. But this leads to three questions:

    (1) Is creating a dedicated lender acct worthwhile at this stage (loan almost paid off)?
    (2) What's the best way to get old and upcoming transactions into the newly created loan account?
    (3) How do I ensure my total net worth remains accurate?
    1)  I don't see it being a question of how much has been paid off.  More to the point, how much longer is this loan going to be active.  A month or two is much different that 18 months.  Real answer is -- your personal choice.  How important is it to you for question 3 to be precisely accurate?

    2)  Old transactions?  Your choice.  You can certainly initialize the loan for the remaining 20% of principle and go forward from there.  If you want to track the old payments, you can do that also.  In that second case, you'll just want to manage the Opening Balance values for any affected account. 

    New transactions?  If I recall correctly, Quicken does not handle a simple interest loan (someone will likely correct me on that if I am wrong; this is not a strong area for me.)  If I'm right, I think you will be needing to make manual transaction entries with split category assignments to [Loan account] principle and "Loan Interest" income category.  As you enter those transactions in your checking account, the [Loan account] asset value will decrease with each payment credited.

    3)  Your net worth will remain as accurate as the data you feed into the program.  Today, you have an asset account where they owe you $1000.  Tomorrow, you record the split as a deposit into your checking account of $100 -- $90 reduces the loan to $910, the other $10 is credited to you as "Loan Interest".  Your net worth increased by $10 as a result.     
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