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Quicken does not properly calculate accrued interest on loans with unscheduled principal payments?

whitenack

Hey all, maybe I don't have my loan set up correctly in Quicken (the software, not the loan), but it doesn't seem like Q is properly calculating interest owed on a loan when I make unscheduled principal-only loan payments.

For example, let's say I had a $100k interest-only loan at 6% interest, payable at the end of the year. I set the account up and Q calculates that I will owe $7200 in interest the first year. However, if I make a $50k principal payment in the 11th month, Q says I owed $3600 for the year.

Is this a flaw or am I not setting things up correctly?

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NotACPA

Is your interest payable monthly, or annually? Because in your example $100K @ 6% = $6,000 NOT $7,200.

Also, where in Q are you seeing this $3,600 calculation?

whitenack

> @NotACPA said:
> Is your interest payable monthly, or annually? Because in your example $100K @ 6% = $6,000 NOT $7,200.Also, where in Q are you seeing this $3,600 calculation?

Oops. You are right. Sorry. Was trying to make a generic example so it would be simpler to discuss but I obviously messed that up! Regardless...

I am seeing this in the loan account, where it tells me the next payment amount. I set up the loan as an interest-only loan according to the instructions here (https://community.quicken.com/discussion/7881919/interest-only-setup). Initially, Q set things up correctly and calculated the interest I would owe at the end of the first year. However, I made a decent principal-only payment in the 11th month, and it now has recalculated the interest owed as if the loan was at this lower amount for the entire year. I see this by looking at the calculated loan payment. I have further experimented with this by creating hypothetical loans and making more drastic payments and can't seem to get it to calculate correctly.

NotACPA

This issue here MIGHT be that Q lacks the ability to set a 1 year "Compounding Period" ... so that $100K @ 6% = $6K.

SO, you can either ignore it or use HELP, Report a Problem ... but this isn't going to be remedied anytime soon.

UKR

I can't speak about the interest calculation, but if you do pay additional principal, when recorded correctly, the payment schedule should reset itself.

However, for the calculation to be correct, I strongly recommend you record these additional principal payments by using a 3rd line in the Split detail.
Here's an example from my mortgage payment. You just use the categories from your regular payment for transfer to loan account and interest category. Line #4 can be blank:

If you record this as a separate payment, set Principal = 0.00, Interest = 0.00, additional principal = the extra amount you paid.

If you pay additional principal with your regular monthly payment, leave the calculated lines #1 and #2 as calculated and put amount in line #3.

whitenack

> @NotACPA said:
> This issue here MIGHT be that Q lacks the ability to set a 1 year "Compounding Period" ... so that $100K @ 6% = $6K.SO, you can either ignore it or use HELP, Report a Problem ... but this isn't going to be remedied anytime soon.

Thanks for the reply. I will double-check, but I am pretty sure I have the loan set up to compound monthly.

whitenack

Am I not doing something right? See the screenshots below. I set up a test loan for $100k, 6% interest compounding monthly, interest only, payable annually on 01/31. Q calculates the interest at $6167.78, and the first payment due on 01/31/24. If I make a loan payment on the 11th month (12/31/23) in the amount of $99k, it says my interest owed is now just $61.68.

Maybe there is a special way of making unscheduled principal-only payments? According to Quicken here (https://help.quicken.com/display/CAN/Make+additional+prepayments+of+principal), there is supposed to be a selection on the Property & Debt tab, but there is no such option for me.

Test loan setup - Screenshot 2023-01-31 180551.png

Test Loan -11th Month Large payment- Screenshot 2023-01-31 181840.png

whitenack

Anyone? Am I the only one who has noticed this (surely that's not the case)...or am I doing something wrong?

Tom Young

Surely you're doing something wrong, though I'm not sure at all that Quicken can actually handle this situation.

What's missing here is that the 6% monthly interest isn't being added to the principal. Your second screenshot should have a principle balance as of the end of the month before maturity of $105,639.59.

whitenack

> @Tom Young said:
> Your second screenshot should have a principle balance as of the end of the month before maturity of $105,639.59.

I have it set up as an interest only loan, so that is why it doesn't show any principal payment owed at the end of the first year.

whitenack

Can anyone recreate this an get the correct results?