How to set-up loan with identical monthly pmts; monthly interest added separately to the balance?
How do I set up a loan with monthly payments, but interest (compounded monthly) added separately to the overall balance? It is a 3-year personal loan.
It looks like loan accounts in Quicken automatically calculate the principal and interest together, but that is not how this particular loan works. The payment is always the same, $1234.90—I assume it's the principal payment. The 6.99% interest payment varies every month, and is added to the balance of the loan.
Also, I can't find the financial institution for this loan—it's a personal loan offered through my Amex credit card, but when I choose Amex in the list of financial institutions and sign in, it only shows my credit card.
American Express National Bank funded the loan, but it's not in the list of Quicken financial institutions. I use my Amex cardholder account to access my loan info, and my cardholder login credentials don't work with other Amex Financial Institutions I tried.
What do you recommend? Thanks for any help you can provide.
Best Answers
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In Quicken Mac, loan accounts are liabilities which are for automatically-calculated loans, while liability accounts can be used for manually-calculated loans. Your situation isn't a typical loan, and isn't something Quicken Mac can do automatic ally. Thus: use a liability account.
As John explained, create a recurring monthly transaction in your checking account for $1234.90 as a Transfer to the liability account. Each month, you'll just need to click on the transaction and click "Paid" to have it show up correctly in both accounts. Then, set up a second scheduled monthly transaction in the liability account using Category=Interest Paid or Loans:Loan Interest. For this transaction, you will need to manually update the amount each month. You could save the scheduled transaction with a zero dollar amount, or a dummy amount like 99.99; each month, you'd mark it Paid and update the amount from either your own calculation or checking your account online. (You could create a simple spreadsheet to show the monthly declining balance and the calculation of the interest each month, print it, and use it for the amount to enter in Quicken each month.) Note: The amount of this transaction will be a negative value if you use the Amount column, or be recorded in the Increase columns if you use the Increase and Decrease columns.
Quicken Mac Subscription • Quicken user since 19931 -
Thanks-this is easy to represent. It just might have a bit of a learning curve if you are new to Quicken. You will figure it out:
A loan is a liability; my suggestions are the old school way of representing it when all that "auto-magic" stuff isn't available (or downloading isn't supported.) This appears to be the case.
Create a new Liability account for the total (what you owe) of the note. Then, create a (scheduled, manual) transaction in your paying checking account for $1234.90 to reduce the liability. Then add a scheduled transaction within the liability to increase the liability amount by the current interest.
You will mark those two transactions as paid monthly. You can adjust the interest transaction each month when you mark it paid with the correct interest amount.
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Thanks @John_in_NC and @jacobs. Done!
I was hoping that the payment and interest could be automatically uploaded as an online account, just like my credit card. 😜
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Answers
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This likely can be done if you do this manually: use an unconnected liability account for the total loan amount, and then make the payments toward it out of a paying account (checking?) via a transfer transaction to reduce the liability.
You need to investigate how that interest is truly being charged/added as I suspect you aren't clear. That is ok as it can be confusing!
If the interest is part of that $1234.90 amount, then it would be a split transaction out of the paying account with part of the amount reducing the principal and the rest going to interest (P&I)
If the interest is a separate charge, then that would go in the liability account to increase the loan amount.
Either way, manually set up scheduled transactions would account for all of this and allow to keep track of it.
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Thanks for your reply.
The interest is NOT part of the $1234.90 regular monthly payment. It is a separate charge, compounded monthly. It slightly increases the loan balance, while the $1234.90 comes from my checking account and reduces the loan balance.
Why a liability account and not a loan account? Is it because Quicken lacks flexibility to edit the principal and interest separately? I tried creating a loan account and deleting the interest portion (principal can't be edited), thinking I'd manually enter in the interest to the loan account, but there also doesn't seem to be any way to do "add" entries to a loan like there is in checking or other accounts.
How would I set up a liability account for this?
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In Quicken Mac, loan accounts are liabilities which are for automatically-calculated loans, while liability accounts can be used for manually-calculated loans. Your situation isn't a typical loan, and isn't something Quicken Mac can do automatic ally. Thus: use a liability account.
As John explained, create a recurring monthly transaction in your checking account for $1234.90 as a Transfer to the liability account. Each month, you'll just need to click on the transaction and click "Paid" to have it show up correctly in both accounts. Then, set up a second scheduled monthly transaction in the liability account using Category=Interest Paid or Loans:Loan Interest. For this transaction, you will need to manually update the amount each month. You could save the scheduled transaction with a zero dollar amount, or a dummy amount like 99.99; each month, you'd mark it Paid and update the amount from either your own calculation or checking your account online. (You could create a simple spreadsheet to show the monthly declining balance and the calculation of the interest each month, print it, and use it for the amount to enter in Quicken each month.) Note: The amount of this transaction will be a negative value if you use the Amount column, or be recorded in the Increase columns if you use the Increase and Decrease columns.
Quicken Mac Subscription • Quicken user since 19931 -
Thanks-this is easy to represent. It just might have a bit of a learning curve if you are new to Quicken. You will figure it out:
A loan is a liability; my suggestions are the old school way of representing it when all that "auto-magic" stuff isn't available (or downloading isn't supported.) This appears to be the case.
Create a new Liability account for the total (what you owe) of the note. Then, create a (scheduled, manual) transaction in your paying checking account for $1234.90 to reduce the liability. Then add a scheduled transaction within the liability to increase the liability amount by the current interest.
You will mark those two transactions as paid monthly. You can adjust the interest transaction each month when you mark it paid with the correct interest amount.
1 -
Thanks @John_in_NC and @jacobs. Done!
I was hoping that the payment and interest could be automatically uploaded as an online account, just like my credit card. 😜
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Doesnthe payment of monthly interest come through as a separate transaction in your checking account? If so, make the scheduled interest transaction in that account, either it being a transfer to the loan account. Then when your checking transactions download, Quicken should match it to the scheduled transaction, using the amount in the downloaded transaction. If the principal payment and interest payment are posted as a single transaction, this won’t work automatically; you’d have to update the split amounts manually each time.
Quicken Mac Subscription • Quicken user since 19930 -
No, the loan does not appear to be available for set-up as an an online (automatic download) account. I couldn't find the bank in Quicken's list of financial institutions. I wish it was! The interest amount changes every month (becoming less and less as the life of the loan goes on). So, I have to enter the interest separately as an increase in the liability account and the monthly payment downloaded from my bank account can be entered as a transfer decreasing the balance in the liability account. Thanks, anyway.
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I wouldn't fret about this; I suspect your time spent having to manually check the interest amount/update/mark that scheduled transaction as Paid to increase loan amount is small compared to trying to deal with perhaps not so reliable online connectivity.
You have more control when you handle it manually.
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