Loan with separate interest payments

Sean McConnon

Hi,

I have a loan where the principal payment is separate from the interest payment. I have two transactions a month. The principal payment is constant and the interest payment decreases every month, due to the principal being paid off.

Is there a way to enter this loan into quicken so that quicken amortizes the loan and therefore predicts interest payments?

Tom Young

Offhand I couldn't think of any way to do this with Quicken as it's geared towards "constant" monthly payments, payments that are only affected by interest rate changes.

In that situation I'd probably use Excel to make the calculations for how the interest element of the payments will be affected over the life of the loan.

UKR

I'm not sure if this would work in your situation, but have you tried this:

Set up the loan as offline account, as something like an Interest Only loan, to record the monthly interest payment: Principal $0, Interest amount as calculated
Set up your principal payment as separate "Additional Principal" transaction, independent of the loan setup wizard: Principal $0, Interest $0, Additional Principal $xxx.xx

Make sure both transactions are set up with splits conforming to the requirements for loan payment transactions in Quicken with 3 or 4 split lines as shown here, but using your own categories and transfer accounts:

If it works as I hope, you should be able to get a proper payment schedule, with recalculated interest after every payment you make.

Boatnmaniac

I ran a number of scenarios in a TEST file and was not successful in getting Quicken to set up and properly calculate the interest amortization schedule for a Loan Account with a flat monthly principal payment for each month.

I think the best Quicken option for you might be:

1)  Set up a 0% interest manual loan.  This will set up a flat monthly payment schedule in the Loan Account and the Loan Reminder that is generated will reflect this.  Enter the Loan Reminder each month before the payment for it downloads from the bank and Quicken should then match the download with the previously entered Loan Reminder.

2)  For the interest payments (since they are a separate payments from the principal payments): 

• Set up a separate recurring Bill Reminder. 
  
• Enter an estimated interest payment and categorize it as Loan Interest or Interest Expense...or use the Mortgage:Interest category if the loan is a Mortgage.  Maybe you can find an online loan amortization calculator or get a schedule from the lender to help you enter what the initial estimated interest payment will be.
• Also set it to estimate the interest amount for future scheduled Bill Reminders.  For future Reminders Quicken will modify the amount based upon the estimation settings you enter.  It won't be perfect but maybe it will be close enough for budgetary and cash flow monitoring.
  
• When you later enter the Bill Reminder into the payment account you will need to manually change the amount of the interest in the Reminder to the actual amount to be paid so when the payment transaction downloads from the payment account Quicken will be able to match them together.
  
• Note that the interest paid will not show up in the Loan Account register or anywhere in the Loan Account.
• The interest payments will show up in Income and Expense reports.
• The interest payments should also be accounted for in Projected Cash Flow reports.
• If this loan is a Mortgage, and you use the Mortgage:Interest category, it should also be captured properly in the Tax Reports and Tax Planner.

I hope this helps.  Let me know if you have any questions.