Setting up loan as Lender

Rick*j

I need help in setting up loan as lender for money lent to family. I set up as Asset as researched but cannot figure out how to accept extra payments that are random both time and dollars paid so that interest and pricnicpal are calculated correctly. Also cannot find where interest is applied in account.

jacobs

When you created the account, did you select Lending Loan as the account type?

Also cannot find where interest is applied in account.

On the loan setup screen you can select which Category to use for Interest. By default, Quicken uses "Income:Interest Earned", but you can use a different category if you already have one:

The default is for monthly compounding of interest. If you are going to receive extra payments frequently and you want to have the exact date of payment taken into account in the calculation, you can switch to daily compounding. (I've never tried this, so I can't say for certain it works as expected.)

On the next screen, you want to set it to create Detailed Reminders, so that it will a create split transaction for interest and principal for each payment, and then select the account you deposit the payment into (in this example, "1-Checking":

So in this example, it is calculating a monthly payment of $943.56. It will automatically create the scheduled transaction in your checking account each month (or whatever time period you specified during set-up) and calculate and apply the changing split between principal repayment and interest earned each month. I set this up so that three payments have occurred so far:

If you click in the loan account, you can see the status of the loan, including the payoff date and balance owed:

So now, let's say you received an extra payment of $5,000. You simply enter this a deposit transaction in your checking account, as a Transfer to the loan account (in this case, the account is called "test loan"):

Then jump back over to the loan account and you will see this extra payment reflected in the Payments register…

…and when you look at the Progress screen, you'll see that the balance has decreased by $5,000, new green and blue lines have appeared to show the effect of the extra payment on the decline in the balance and the decrease in interest earned over the life of the loan. You can see the expected payoff date has jumped to be six months earlier:

(Note: The loan payment amount remains the same after you receive an extra payment; it shortens the life of the loan. If you instead want to keep the life of the loan the same and reduce the monthly payment, you'd have to go back to the loan setup screen to adjust the values there to arrive at the monthly payment you want.)

I hope that helps!