It is pretty simple to manage and keep track of your loans in Quicken.
Let's understand this with an example. Assume that you bought a new car worth $30,000. You made a down payment of $5000; and borrowed a loan of $25,000. To keep track of this loan, you need to:
Create asset and liability accounts
You need to create an asset and a liability account to keep track of your car (asset) and your loan against the car.
- Add an asset account for your new car.
- Enter the first transaction with the category as Adjustment for the opening balance. In the Increase field, enter the current value of your car, which is $30,000.
- Create a loan/liability account for the actual loan amount borrowed.
- Enter the first transaction with the category as Adjustment for the opening balance. In the Increase field, enter the actual loan amount.
Record loan repayment transactions
Once you start repaying your loan, you can keep track of the amount paid as principal and interest.
- Go to the account from which you are repaying the loan, usually a checking account.
- Add a new transaction with the category as Adjustment for the opening balance. In the Amount field, enter the total amount paid as the first installment (principal plus interest). For the above example, assume you paid $360.
- Add splits. Enter the first split transaction as a transfer of the principal amount to the loan account. Enter the second split transaction as the interest amount paid. Ensure that the total of the principal and interest amount in the splits equals the amount mentioned in the transaction.
- Go to the liability account you created for your car. You will see that the principal amount transferred is applied and your total loan amount is reduced.
Create a recurring schedule
You can now schedule the loan repayment as a recurring transaction. Go to your checking account and create a recurring monthly transaction with a split between the interest and the principal in the loan account.
Every month, you just need to click on the transaction. If required, update the amounts and mark the transaction as Paid.
Adjust the value of your asset
We recommend that you go to your asset account regularly and adjust the value of your asset depending on whether the value has increased or decreased. This is important to help you have a clear picture of your total net worth.