How to Track an Amortized Loan in Quicken 2010 - dummies

How to Track an Amortized Loan in Quicken 2010

By Stephen L. Nelson

If you have an amortized loan — a loan on which you make regular, equal payments — Quicken 2010 can help you keep track of it. As long as you have your loan information handy — the loan amount, interest rate, balance, and so on — setting up this type of account in Quicken has a lot of steps but is easy to do.

1Click the Home tab in Quicken.

The Quicken Home page appears.

2Click the Add Account button (which appears in the lower-left corner).

The Account Setup dialog box appears.

3Click the Loan radio button, and then Next.

Quicken displays the Loan Setup dialog box.

4Click the Summary tab.

That tab opens in the dialog box.

5Select the appropriate radio button in the Loan Type section.

You can choose from Borrow Money or Lend Money.

6In the New Account text box, name the new loan account something clever.

You can get creative with a like Mortgage or Car Loan.

7Select a radio button in the Have Any Payments Been Made? section.

Your options are Yes and No, so hopefully you can figure out which is appropriate.

8Click Next.

Quicken displays another set of boxes and buttons.

9Enter 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.

10Enter the original loan amount into the Original Balance text box.

You can get this amount, if you’re unsure, from the original loan documents.

11Enter 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.

12Select how often the bank calculates loan interest from the Compounding Period drop-down list.

The interest-compounding period usually equals the payment period.

13Select the appropriate radio button in the Payment Period section.

If you make regular monthly payments, for example, select the Standard Period option button, open the Standard Period drop-down list, and select Monthly. If you can’t find an entry in the Standard Period drop-down list 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 text box.

14Click Next.

Quicken displays another set of boxes and buttons on the Summary tab.

15Select a radio button in the Balloon Information section.

If the loan doesn’t have a balloon payment, make sure that the No Balloon Payment radio button is selected. If the loan does have a balloon payment, select the Amortized Length radio button; then use the Amortized Length text box and drop-down list to specify the number of years or months (or whatever) over which the loan is amortized. If you know that you have a loan payment (and know the loan payment amount) but don’t know what the amount is or when it occurs, select the Calculate radio button.

16Select the Current Balance radio button and enter how much you still owe in the text box if you’ve made any payments.

If you don’t know the current balance, call the lender and ask for it.

17Enter the date as of which the current balance is, well, current in the As Of text box.

You can click that icon at the right end of the As Of text box to display a pop-up calendar.

18In the Payment section enter the loan’s interest rate into the 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 (such as 7.625). You should be able to get this rate from the lender or the prospective lender.

19Select the Calculate radio 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.

If you haven’t entered all this information, select the Payment Amount (P+I) radio button, and then enter the loan principal and interest amount into the Payment Amount (P+I) text box. If necessary, edit the next payment date in the Due On drop-down list box.

20Click Done.

If you asked Quicken to calculate anything for you, a dialog box pops up, telling you that Quicken did so. Click OK if that dialog box appears.

21Make sure that the Quicken calculations make sense, and then click Done again.

Quicken displays the Set Up Loan Payment dialog box.

22Verify the principal and interest payment calculated by the program.

If it’s wrong, you probably entered one of the loan calculation inputs incorrectly, such as the loan balance, loan term, or the interest rate.

23Click the Edit button.

Quicken displays the Split Transaction dialog box.

24Describe 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.

25Click OK.

Quicken calculates the full payment and redisplays the Set Up Loan Payment dialog box.

26Select an option for how you make payments in the Type drop-down list box.

Payment means that you handwrite checks; Print Check means that you print checks by using Quicken; and Online Pmt means that you use Quicken Online Banking to make electronic payments.

27If you print checks by using Quicken and want to put the payee’s address on the check, click the Address button in the Set Up Loan Payment dialog box.

Quicken displays a dialog box that you can use to input the payee’s address.

28Provide the appropriate name and address information, and then click OK.

The Set Up Loan Payment dialog box reappears.

29Type the lender’s name in the Payee text box.

The payee is just the name of the person or business that loaned you the money.

30(Optional) Type a description in the Memo text box.

For example, you can stick the loan account number in the check’s Memo text box.

31Type a date in the Next Payment Date text box.

This date marks when your next loan payment is due.

32Select an option from the Category for Interest drop-down list.

Choose the category that best describes this loan payment.

33Click OK.

Quicken removes the Set Up Loan Payment dialog box and asks whether any asset is associated with the loan.

34Click No.

Quicken displays a new Net Worth tab, or window.

35Click the new account.

Quicken displays the transaction list register.