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Set Up a Liability Account for an Amortized Loan in Quicken 2014

Setting up a loan account requires a few dozen steps in Quicken 2014, but none of the steps are difficult. And none takes that much time to complete. As long as you have your loan information handy — the loan amount, interest rate, balance, and so on — setting up this type of account is a snap.

An amortized loan is one on which you make regular, equal payments. Over time, the principal portion of each payment pays off, or amortizes, the loan principal. If you borrowed money to purchase a house, a car, a flock of live ostriches, or anything else that’s really expensive and that you pay off over several years, chances are good that your loan is of the amortizing variety.

Here’s the recipe for setting up a liability account:

  1. Click the Add An Account button.

    The Add An Account button appears in the lower-left corner of the Accounts bar.

  2. Tell Quicken you want to set up a loan account.

    When Quicken displays the Add Account dialog box, click Loan and then Manual Account Setup. Quicken displays the Loan Details dialog box. (See the following figure.)

    The Loan Details dialog box.
    The Loan Details dialog box.
  3. Name and (optionally) classify the loan account.

    Use the Name of This Loan in Quicken text box to give the loan a name. And please be clever here. Then, consider using the Loan Type drop-down list box to classify the loan by selecting a loan type (such as auto loan, consumer loan, or commercial loan) from the list.

  4. Enter the date that you borrowed the money in the Opening Date text box; or, if your loan has a grace period (like a student loan), enter the date when your loan enters the repayment period.

    Quicken needs to know this date so that it can calculate the interest the loan started to accrue when you borrowed the money. The program suggests the current system date as the Opening Date, but this is probably wrong.

  5. Enter the original loan balance.

    Enter the original loan amount into the Original Balance text box. You can get this amount, if you’re unsure, from the original loan documents.

  6. Specify the interest rate.

    Enter the loan’s interest rate into the Current Interest Rate text box. The loan interest rate, by the way, isn’t the same thing as the APR, or annual percentage rate. You want to enter the actual interest rate used to calculate your payments. Enter the interest rate as a decimal amount. For example, don’t type 7 5/8; instead, type 7.625. You should be able to get this rate from the lender or the prospective lender.

  7. Enter the loan term in years in the Original Length text box.

    If you set up a 30-year mortgage, for example, type 30. You may have to perform one tiny trick when entering this figure: If you set up a loan that includes a balloon payment, enter the number of years over which the loan will be fully paid — not the number of years used for calculating the loan payment. For example, loan payments may be calculated based on a 30-year term, but the loan may require a balloon payment at the end of 7 years. In that case, type 7 in the Original Length text box.

  8. Indicate how often the bank calculates loan interest.

    Use the Compounding Period text box to specify how often the bank calculates interest on the loan. The interest-compounding period usually equals the payment period.

  9. Describe how often you make a loan payment by using the Payment Schedule drop-down list box.

    If you make regular monthly payments, for example, select Monthly from the Payment Schedule drop-down list box. If you can’t find an entry in the Payment Schedule drop-down list box that describes how often you make payments, select the Other Period list entry and then type the number of payments you make each year in the Payments Per Year text box. Note that the Payments Per Year text box doesn’t appear unless you select Other Period.

  10. Enter the Current Balance if you’ve made any payments.

    If you’ve already made payments on the loan, specify how much you still owe on the loan after making the last payment by using the Current Balance text box. If you don’t know the current balance, call the lender and ask for it. If you haven’t made any payments yet, skip to Step 11.

  11. Correct the calculated payment amount (if necessary).

    After you enter the loan information discussed in the preceding steps, Quicken calculates the loan payment by using the loan balance, term, and interest rate you entered. In most cases, the calculated payment should be right. But if the calculated payment is wrong, say due to a rounding error or because your loan includes a balloon payment, enter the correct loan principal and interest amount into the Regular Payment text box.

    You can tell Quicken to recalculate the payment or current balance amount using some new bit of loan information you enter. Just click the field you want to update and then click the Recalculate button.

  12. Click Next.

    Confirm that the Quicken calculations make sense and then click Next. Quicken displays the second Loan Details dialog box (shown in the following figure).

    The second Loan Details dialog box.
    The second Loan Details dialog box.
  13. Verify the principal and interest payment calculated by the program.

    If it’s wrong, you can keep going, but let me point out a minor yet annoying problem. You probably entered one of the loan calculation inputs incorrectly, such as the loan balance, loan term, or the interest rate. Fortunately, these errors are only a minor bummer.

  14. (Optional) Indicate any amounts you pay besides principal and interest.

    If your lender requires you to add a little extra to the payment — such as for insurance, say, or for property taxes — enter that amount into the Other text box. If you want, you can also enter an extra principal payment into the Extra Principal Paid text box.

    If you want to set up a loan payment so it includes an extra chunk of principal payment, you can enter either the extra amount into the Extra Principal Paid text box. Or you can select the Total Determines Extra Principal option button — when you do this, Quicken turns the Total Payment field into a text box — and then enter the total payment you can afford to make, including any extra principal, into the Total Payment text box.

  15. Set up a loan reminder.

    To help you remember your loan payments — hey, nobody likes late payment fees — Quicken at this point displays a message box that informs you Quicken add a loan reminder message to the account so you don’t forget. You can also use this message box to tell Quicken that it can go ahead and actually enter the loan payment transaction for you — just mark the check box labeled “Heck yeah” and specify how many days before the due date the transaction should be entered.

    You can also fine-tune the way the reminder and data entry work using the lets you schedule reminder messages using the Loan Payment Reminder dialog box. (See the following figure.) To tweak your reminder and transaction data entry, enter the lender name into the Pay To text box and the next payment date into the Due Next On text box, and then select the bank account you’ll use to make the payment from the From Account drop-down list box.

    The Loan Payment Reminder dialog box.
    The Loan Payment Reminder dialog box.
  16. Describe the transaction splits.

    Quicken allows you to split transactions into multiple categories. If you want to split a loan payment, click the Split link in the Loan Payment Reminder dialog box and then the Split button in the little message box that Quicken displays. Quicken displays the Split Transaction dialog box (see the next figure), which you can use to describe any additional amounts the lender requires you to pay.

    In the case of a mortgage, for example, you may be required to pay property taxes or private mortgage insurance. After you enter the information and click Adjust and then OK twice, Quicken calculates the full payment and redisplays the Loan Payment Reminder dialog box. (Refer to the previous figure.)

    The Split Transaction dialog box.
    The Split Transaction dialog box.
  17. Tag or add a memo description to the loan payment transaction.

    If you click the Tag or Memo link on the Loan Payment Reminder dialog box, Quicken displays a little message box you can use to add a tag or memo.

  18. (Optional) Fine-tune the way the reminder works.

    If you want, you can click the Optional Settings link to get to other links that let you specify things like how many days in advance you want to be reminded.

  19. Click Done twice.

    Quicken adds the new loan payment to your financial records, along with the payment details and any reminder message settings you set up.

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