How to set up a loan as a asset

Doug Kaess

Assets

jacobs

@Doug Kaess Just to make sure we're on the same page: do you mean you have lent someone money, and you want to track that loan and its repayment?

jacobs

@Doug Kaess Just to make sure we're on the same page: do you mean you have lent someone money, and you want to track that loan and its repayment?

Doug Kaess

Yes that is it

jacobs

Okay, Quicken Mac doesn't have any automated features for lender loans, like it does for mortgages or car loans. But you can pretty easily set things up with only a little bit of manual tweaking.

Create a new Asset account by clicking the + icon at the top of the sidebar. If this loan has existed for awhile and you just want to pick up where things stand now, you can enter the current loan balance as the perming balance; if this is new, or you want to record the entire history, just click Finish without entering any opening balance. you can rename the account from the generic "Asset" by control-clicking it in the left sidebar and selecting Rename from the menu.

To create the loan amount, enter a transaction in your checking account for the money you gave to the borrower; instead of a category, use a Transfer to the asset account (that is, the Category field would be "Transfer:[asset account name]" ). This transaction reflects the money which came out of your checking account that you gave to the borrower, and creates the loan balance in the asset account.

The next step is to set up a recurring transaction for the loan payments, as a split between Interest Income and a reduction in principal. Is this loan being done like a traditional loan, with a set interest rate and term of the loan? If so, do a Google search for loan amortization schedule and select any of the many websites — such as this one — which will calculate the details: you enter the amount of the loan, the duration, and the interest rate, and it will produce the monthly payment amount and the amortization table to show how much of each month payment is interest and how much is principal. Print out the amortization schedule.

Here's the start of one for a $10,000 loan being paid back over 5 years at 3% interest:



Using this example (assuming you're going to get monthly payments from the borrower), you can then set up a scheduled transaction in your checking account for a deposit of $179.69 on the 1st or last or whatever day of each month. Set the transaction up as a split, with the first split line being a $179.69 transfer to the Asset account and the second asset line being $25.00 categorized as Personal Income:Interest Earned.

Here comes the part that's manual and not automated for you by Quicken. Each month, you receive the payment and deposit it. Mark the scheduled transaction as Deposited. You may need to adjust the date, since the payment likely doesn't arrive on the same day every month. And while you're there, double -click the transaction, look at your amortization schedule, and adjust the split amounts for the prior split for the current month. It may seem annoying to have to do this manually, but as long as you keep the printed amortization schedule handy, it will take you less than 30 seconds a month, so it's no bug deal. (You don't even have to do it each month; you can wait a few months and then come back to edit several transactions at once if you prefer.) 

This properly categorizes the interest income you've earned, the asset value in your left sidebar shows you at a glance the outstanding balance, and the asset account register shows you the history of the payment transactions. 

Make sense? Post back if I lost you somewhere.

Doug Kaess

It was helpful but the loan is secured property that I sold. It is like a mortgage only I am the mortgage holder

jacobs

I'm not sure I understand what you're saying won't work about the process I described? You sold the property but didn't receive cash for it; you instead have a loan which is being paid back over time. The only difference with what I wrote above is that you didn't start with writing a check to loan someone money. Simply create the asset account and give it the starting balance of the initial loan amount, then proceed as I described to record the monthly payments you'll receive for interest and reduction of principal.

Is there something I'm not understanding? 

Doug Kaess

I will go through this again and let you know
Thanks

Doug Kaess

I went back through the instructions. When I enter transfer:and the account, into the category it reduces my checking account balance by that amount. No money has actually been dispersed. Am I missing something?
Thanks for your help

Doug Kaess

The problem is solved. The asset that the money had to come from was not a checking account but the property account that was sold. Thanks