Personal Lender Account

steppinwolf7

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?

Frankx

Hi @steppinwolf7,

The proper way to record this loan would be to:

A) setup an asset account (actually Quicken calls this an "Other Asset" account) which you could title "Loan Receivable".  When you loaned the money initially, you would have used this account to record the loan transaction.  The rationale is that when you make a loan, you decrease one asset (the cash your bank account) but increase another asset account (the Loan Receivable) for the same amount.  You probably recorded the loan in some expense "category" making it look like an expense.

B ) As you receive payments, the way those payments are recorded depends on whether the loan is "interest bearing" or "without interest".  If it was an interest bearing loan, the payments you receive would be posted partly to the "Loan Receivable" account and partly to Interest Income.  If it were a no interest loan - the entire payment(s) would be applied to "Loan Receivable".

To answer your direct questions:

1) not sure what you mean by "dedicated lender account" but (assuming you are not meaning a new separate bank account - which would not be needed) I think the above steps  answers this question.
2) To get the accounts up-to-date, you can setup the Loan Receivable account (as above) and then just change the categories that any previous entries were posted to conform to my instructions above.
3) If you follow these instructions and assuming you receive full payment, if you charged the borrower interest - your total net worth will not change.  If you did charge interest - your total net worth will increase by the amount of interest you received.

Let me know if you have any follow-up questions.

Frankx