How do I set up and track a loan I gave when no payments are required, interest accrues?

Question

I lent a family member some money secured by their home. It's a 30-year amortized note at 2.5% with a 10th year balloon repayment.  He is not required to make any monthly payments during the loan duration. At the end of the ten year mark, the balloon of principal and interest is due in entirety. I can't for the life of me figure out how to set this up so Quicken "knows" the amortization and will automatically add the interest back into the balance for next month's calculation. Has anyone figured this out? Currently I've been using an excel printout and manually entering the interest accrual every month. It works, but it requires me to pull that spreadsheet out every month.

Jim_Harman · Answer

Also you may want to consult a tax advisor on whether a loan with terms like you describe would be treated as a gift if you were audited.

NotACPA · Answer

There's no current automatic feature in Q to handle this type of loan.

What you might try doing is creating a transaction that's self-referencing … I.e., it's a transfer back into the same loan account with the increase amount calculated each month, in the account as "Principal x 0.025 / 12".  The calculator that's built into the account register can easily handle this.

Whether you use the original loan  amount as that "Principal", or the amount owed after that prior payment would depend upon whether it's Compound Interest, or not.  If not, it's the same interest every month and could be a memorized transaction.

That it's 30 years, payable in 10, has no bearing upon the interest calc … only upon the principal portion of an amortized loan.

[EDIT} BTW, there's no "amortization" of the loan as you describe it.  "Amortization" refers to the monthly split between Int & Prin … and your loan has no monthly prin pmt. [/EDIT]