Partial early payments before due date on an auto loan.

Question

I hope someone smarter than me can help. :)

I set up an auto load using the wizard. I want to make several payments throughout the month leading up to the due date, so that by the due date, the payment is not so large. As a test I paid $50.00 to my lender 2 weeks early and after a few days it processed and showed a smaller payment due, by the same due. So, from their end it works as I hoped.

But this 50.00 payment was applied first to the owed interest for this monthly payment. But I see no way in Quicken to manually add/edit this first payment to where it will now show a lower monthly first payment by the same first due date, that reflects this $50.00 payment as interest. Because if I try to edit this first payment, it does not allow me to reflect early interest or principal payments as it is locked and unchangeable. So I can't reflect an early interest/principal payment leading up to the scheduled first payment. I can only add an addition amount paid as principle which isn't what I'm doing here.

I hope this makes sense, and I hope someone can explain if this is possible to do. An early thank you to those that try and help. :)

NotACPA · Answer

"With this, I wouldn't have a running balance on the loan I assume. "

@Joseph Fuller, no you'd still have the  balance shown in your Loan acct in Q.  BUT,  as you've stated it,  that first payment is Interest only, which doesn't impact the balance.

Only the split txn (as shown by @UKR) reduces your balance.

UKR · Answer

When making additional payments to a loan, for your transaction you should always use Transaction Split Detail that is an exact copy of a regular monthly payment.

Here's an example of a regular payment:

Line 1 represents the amount of regular principal payment, as calculated by the loan wizard. It should not normally need to be changed

Line 2 represents the amount of interest you are paying this month, as calculated by the loan wizard (the example happens to be the last full payment before the loan was paid off, hence the small interest amount). May need to be adjusted later, based on the finance company's statement

Line 3 represents the amount of additional principal payment you are making this month or $0.00. It also represents the difference to the amount that the finance company actually deducted from your principal balance. This will always be off by a few cents, depending on when the finance company actually received your payment and how much interest they actually deducted.

In your example with the $50.00 payment which the finance company applied to Interest, you would create a $50.00 transaction with split detail categories as shown above, but the Split amounts will be

Line 1: $0.00

Line 2: $50.00

Line 3: $0.00

subject to verification with the monthly loan statement as there may be differences. Payments are always applied to Interest Due first, before being applied to Principal … that way the finance company can charge you more on the remaining Principal Due

IMHO, it might be easier and a lot less work for both you and the finance company if you only paid once a month, on the Due Date. If possible, use the finance company's Autopay service to allow them to deduct the monthly payment on Due Date and automatically debit your checking account every month. Of course, you have to make sure that there's enough money in the checking account when payment is due …

Joseph Fuller · Answer

NotACPA, I thank you for taking the time to help me. And I understand your suggestion of simply creating M transaction as a simple monthly bill. And I will keep that in mind for sure. With this, I wouldn't have a running balance on the loan I assume.

I did stubble onto one way that might work but maybe you can see what you think. Let's assume the same $50.00 early payment. If I first record the $50.00 transaction into the register of this wizard created account, then click on edit to the Monthly Payment that would still show the full amount, then edit the payment using "other" and enter a -$50.00 that reflect that early payment. It will change that same scheduled payment by $50.00 less. But I would have to use this way every time I made and early payment to continue bring down that scheduled amount, then remove these subtractions for the next scheduled payment to reflect the full amount again. Of course, the categories would be skewed because even though I can assign the $50.00 as interest in the manual entires, I can't change the intrest amount for the scheduled payments. But this would be ok as I don't need to follow that just as long as it balances in the end. What do you think about this?