How to add credit line partially loaned to another

I have a secured credit line from my bank (with a specific loan limit, say 300k), and I have drawn an amount on it (say 200k) and loaned it to a friend. I have monthly interest payments to the bank on the principal (remaining difference between the loan limit and the balance, initially 200k) which are drawn from the credit line. I will also make occasional principal payments from my cash accounts. My friend will make monthly loan payments of principal and interest.
How should I represent this in Quicken and properly categorize the payments? Right now, I created the credit line as a banking account and the loan to my friend as an asset account loaned to another (so the P&I are calculated properly each month). I've kept both as "separate" accounts so they don't affect my Net Worth, but is that the best way? If I make a principal payment from my cash accounts, that will reduce my net worth, which doesn't seem right.
Advice appreciated.


  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    Hi @Dean100,

    Yes, the way you've recorded the transactions - by using separate accounts - is going to cause your net worth to be negatively affected (as you note above) because you are not recording all transactions related to this "arrangement" in the separate accounts. Actually, for a number of reasons, I believe that you would have been better off had you simply not created any separate accounts and kept all these transactions "on your books".

    Additionally, from a tax perspective, you may be aware that you would need to report interest that you receive on the loan as interest income on your tax return, and may not be able to deduct the interest you are paying on the credit line, depending on your particular tax situation.  Also, technically, you may have IRS reporting requirements (e.g. 1099 requirements) relating to the loan.

    If you haven't already, I would suggest that you have a discussion with your accountant.


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  • Dean100
    Dean100 Member ✭✭
    Thanks, Frankx. I decided to keep the accounts among my regular ones, as you suggest, but without showing the credit limit as a transaction, only the amount already drawn. That properly represents principal payments as simply a transfer of assets between accounts and has a zero-sum effect. And yes, I will have to declare interest income.
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