Interest compounding options

MarkRimbaugh

Several loans that I have taken out over the past few years have what they call a "Simple Interest," where the interest is calculated on a daily basis. Quicken only has monthly and semi-annually, so my monthly payment is never correct. It's only off be a couple dollars, but it thinks I'm paying a little more toward my principle than I really am. It would be great if we could select this "simple interest" when creating a loan in Quicken.

NotACPA

The problem with "simple interest" calculations, is that the interest owed is, in part, dependent upon when your payments are posted to the loan … and Q has no way of knowing that.

I'd vote against this idea.

MarkRimbaugh

I appreciate your comment, but I have to respectfully disagree. As a software developer I can see how this would be done. The payment amount is fixed, but the portion of that payment going toward interest would depend on the days between payments, as you said. The daily interest rate can be calculated based on the principal… just multiply that amount by the number of days since the last payment and that should tell Quicken how much of that payment should be toward interest, while the rest goes to principal.

MarkRimbaugh

I'd even go one step further, that daily interest rate could be used to adjust the loan balance on a daily basis so it more accurately reflected the actual balance.

Chris_QPW

I doubt this will be implemented. This and requests like it are one of the main reasons why Intuit implemented downloading of loan accounts in the way they did.

Before that feature existed and people were requesting downloading of loan accounts, I think most people thought what would be implemented was they used the existing loan schedule wizard to fill in a reminder for the payment/interest details and then just download the net amount in the loan account and match it.

Intuit didn't do that because they had another problem, one just like the one you are talking about. Not only did they have this problem with the "simple interest" kinds of loans, but they also had the problem where the loan companies come out with all kinds of crazy loan schedules and the Quicken users wanted them supported in the loan schedule wizard.

Instead of doing this, what they did is switch to a model where the financial institution sends the details and Quicken "just believes it". This eliminates the need for Quicken's loan schedule wizard to understand these kinds of loans.

NotACPA

I'm a retired software developer (& systems VP) for banks.

Daily/simple interest depends upon when the lender posts the payment to the account … NOT when you make the payment. That's how the the interest owed with the NEXT payment is calculated. It's days from last payment posted to days of next payment posted that determines the interest.

How is Q supposed to know that at the time you make the payment???

Chris_QPW

I could certainly see them implement it as described, and then get a rash of complaints that interest calculated isn't exactly right because it is based on the date that the person put for the payment instead of what the financial institution actually used.

Which then brings up this point. If it can't be calculated exactly it is pretty useless because that mean you are going to have to change it, which is no different than just setting up a manual reminder and updating it for the principal/interest when these are known.

MarkRimbaugh

I think it's reasonable that you can set the due date and have Quicken make an educated guess as to what the interest payment is based on the daily rate, but the user could have the option to change the post date and then it could adjust the calculation from there.

It really doesn't seem that complicated, but I can see this is already a very unpopular request, so I will continue doing what I always do… manually change the split when I get my statement.