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Set Up a Liability Account for an Amortized Loan in Quicken 2012

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 Winnebago, or anything else that’s really expensive and that you pay off over several years, chances are that your loan is of the amortizing variety.

Here’s the recipe for setting up a liability account in Quicken 2012:

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 Next. Quicken displays the Loan Setup dialog box.

3

Provide some basic background information. Then click Next.

Use the Loan Type option buttons to specify whether you’re borrowing money or lending money. Use the New Account text box to name the new loan account something clever like mortgage or car loan. And use the Have Any Payments Been Made? option buttons to indicate, well, whether you’ve started making payments yet. After you click Next, Quicken displays another set of boxes and buttons.

4

Enter the date that you borrowed the money in the Opening Date text box; or, if your loan has a grace period, 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

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.

7

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.

8

Describe how often you make a loan payment by using the Payment Period options.

If you make regular monthly payments, for example, select the Standard Period option button, open the Standard Period drop-down list box, and choose Monthly. If you can’t find an entry in the Standard Period drop-down list box that describes how often you make payments, select the Other Period option button and then type the number of payments you make each year in the Payments Per Year text box.

9

Click Next.

Quicken displays another set of boxes and buttons on the Loan Setup dialog box.

10

(Optional) Describe the balloon payment (if you have one).

The balloon payment option buttons and boxes let you alert Quicken to any balloon payment you must make in addition to the last regular loan payment. If the loan doesn’t have a balloon payment, ignore this stuff and make sure that the No Balloon Payment option is selected.

11

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

If you indicated that 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.

12

Enter the date as of which the current balance is, well, current.

Use the As Of field to indicate the date for which you’ve entered the current balance. All the standard date entry and date-editing tricks apply to this text box. You can press the + and – keys, for example, to move the date ahead and back by one day. And you can click that icon at the right end of the As Of text box to display a pop-up calendar.

13

Specify the interest rate.

Enter the loan’s interest rate into the Interest Rate text box in the Payment section in this window. 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.

14

(Optional) Describe the payment in more detail (if necessary).

If you’ve entered all the loan information that Quicken has requested in the preceding steps, you can just select the Calculate option button in the Payment area. Quicken then calculates the loan payment by using the loan balance, term, balloon payment information, and interest rate you entered.

15

Click Done.

If you asked Quicken to calculate anything for you, a dialog box pops up, telling you that Quicken did so. Click OK. Make sure that the Quicken calculations make sense and then click Done again. Quicken displays the Set Up Loan Payment dialog box.

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