[Loan] How Do I Get Quicken To Calculate Proper Interest-Principal Split Based On Payment Date

Posted by Lisa B. on January 29, 2007, 2:15 pm

Please log in for more thread options

When I set up a loan (and set up the loan payments), it appears that Quicken
*DOES NOT* adjust the Interest-Principle split according to my payment
date...instead, it uses (apparently) the value that it has already calcuted
for the split, assuming that the payment posts to the loan account exactly
on the due date.

In case that doesn't make sense...let me clarify:

If I make my payment a week early, then less interest has accrued, and
therefore more of my payment goes to principle. So, If I change the payment
date when entering my scheduled payment in Quicken, then I expect Quicken to
adjust the split. However, as far as I can tell, Quicken does not do this.
What this means, is that every time I make a payment, the split is wrong,
and I have to go in and manually change the values for the split, so that my
remaining principal balance is accurate.

Am I overlooking something here? Does Quicken not have the ability to
properly calculate the interest based on the acual payment date?

I am using Quicken 2006...maybe this is fixed in 2007?

Lisa B.

Posted by scott s. on January 29, 2007, 3:41 pm

Please log in for more thread options

> When I set up a loan (and set up the loan payments), it appears that

> Quicken *DOES NOT* adjust the Interest-Principle split according to my

> payment date...instead, it uses (apparently) the value that it has

> already calcuted for the split, assuming that the payment posts to the

> loan account exactly on the due date.

I use Q05, and I have never found a way to get a loan to amortize
correctly when interest is accrued daily.

scott s.
.

Posted by L on January 30, 2007, 8:29 am

Please log in for more thread options

> When I set up a loan (and set up the loan payments), it appears that

> Quicken

> *DOES NOT* adjust the Interest-Principle split according to my payment

> date...instead, it uses (apparently) the value that it has already

> calcuted

> for the split, assuming that the payment posts to the loan account exactly

> on the due date.

> In case that doesn't make sense...let me clarify:

> If I make my payment a week early, then less interest has accrued, and

> therefore more of my payment goes to principle. So, If I change the

> payment

> date when entering my scheduled payment in Quicken, then I expect Quicken

> to

> adjust the split. However, as far as I can tell, Quicken does not do

> this.

> What this means, is that every time I make a payment, the split is wrong,

> and I have to go in and manually change the values for the split, so that

> my

> remaining principal balance is accurate.

> Am I overlooking something here? Does Quicken not have the ability to

> properly calculate the interest based on the acual payment date?

When you set up the loan Quicken performed an amortization calculation for
the interest rate and recurring payment dates you chose. Once entered, each
monthly payment is treated like any other scheduled transaction. It seems
that you are asking Quicken to examine each scheduled transaction at the
time of posting to see whether it is linked to a loan established within
Quicken, and then to adjust the splits. I'm sure that kind of dynamic
real-time decision making software exists, but I haven't seen it in a
personal finance program.

> I am using Quicken 2006...maybe this is fixed in 2007?

Fixed?
I'm not at all sure that it is broken. After all, even the financial
institution where the loan resides does not compute an accurate 'payoff'
amount on a daily basis - hence the disclaimer on your statement that the
principal amount listed is not a payoff amount, even if you pay directly on
the due date.
Unless you are talking about a really huge mortgage, the difference should
be small enough that an adjustment entry once per year (when you receive
your tax information from your bank) should suffice.

Posted by scott s. on January 30, 2007, 2:54 pm

Please log in for more thread options

>> When I set up a loan (and set up the loan payments), it appears that

>> Quicken

>> *DOES NOT* adjust the Interest-Principle split according to my

>> payment date...instead, it uses (apparently) the value that it has

>> already calcuted

>> for the split, assuming that the payment posts to the loan account

>> exactly on the due date.

>> In case that doesn't make sense...let me clarify:

>> If I make my payment a week early, then less interest has accrued,

>> and therefore more of my payment goes to principle. So, If I change

>> the payment

>> date when entering my scheduled payment in Quicken, then I expect

>> Quicken to

>> adjust the split. However, as far as I can tell, Quicken does not do

>> this.

>> What this means, is that every time I make a payment, the split is

>> wrong, and I have to go in and manually change the values for the

>> split, so that my

>> remaining principal balance is accurate.

>> Am I overlooking something here? Does Quicken not have the ability

>> to properly calculate the interest based on the acual payment date?

> When you set up the loan Quicken performed an amortization calculation

> for the interest rate and recurring payment dates you chose. Once

> entered, each monthly payment is treated like any other scheduled

> transaction. It seems that you are asking Quicken to examine each

> scheduled transaction at the time of posting to see whether it is

> linked to a loan established within Quicken, and then to adjust the

> splits. I'm sure that kind of dynamic real-time decision making

> software exists, but I haven't seen it in a personal finance program.

There's no decision making required. In my case, the loan payment amount
was fixed. All that is needed is to compute the interest accrued and
payable at the date the transaction is entered, and subtract that from
the total payment amount to determine the amount of principle. My
understanding is that the methods of amortization for consumer loans
is set by regulation, so there shouldn't be any guesswork.

>> I am using Quicken 2006...maybe this is fixed in 2007?

> Fixed?

> I'm not at all sure that it is broken. After all, even the financial

> institution where the loan resides does not compute an accurate

> 'payoff' amount on a daily basis - hence the disclaimer on your

> statement that the principal amount listed is not a payoff amount,

> even if you pay directly on the due date.

> Unless you are talking about a really huge mortgage, the difference

> should be small enough that an adjustment entry once per year (when

> you receive your tax information from your bank) should suffice.

Maybe I'm unusual, but if I am going to go to the effort of keeping
a set of books for myself, I would really like accurate data, not
just an estimate. Otherwise I could skip the whole thing and just
accept the 1098 when I get it.

scott s.
.

Posted by L on January 31, 2007, 3:15 pm

Please log in for more thread options

>>>

>>> When I set up a loan (and set up the loan payments), it appears that

>>> Quicken

>>> *DOES NOT* adjust the Interest-Principle split according to my

>>> payment date...instead, it uses (apparently) the value that it has

>>> already calcuted

>>> for the split, assuming that the payment posts to the loan account

>>> exactly on the due date.

>>>

>>> In case that doesn't make sense...let me clarify:

>>>

>>> If I make my payment a week early, then less interest has accrued,

>>> and therefore more of my payment goes to principle. So, If I change

>>> the payment

>>> date when entering my scheduled payment in Quicken, then I expect

>>> Quicken to

>>> adjust the split. However, as far as I can tell, Quicken does not do

>>> this.

>>> What this means, is that every time I make a payment, the split is

>>> wrong, and I have to go in and manually change the values for the

>>> split, so that my

>>> remaining principal balance is accurate.

>>>

>>> Am I overlooking something here? Does Quicken not have the ability

>>> to properly calculate the interest based on the acual payment date?

>> When you set up the loan Quicken performed an amortization calculation

>> for the interest rate and recurring payment dates you chose. Once

>> entered, each monthly payment is treated like any other scheduled

>> transaction. It seems that you are asking Quicken to examine each

>> scheduled transaction at the time of posting to see whether it is

>> linked to a loan established within Quicken, and then to adjust the

>> splits. I'm sure that kind of dynamic real-time decision making

>> software exists, but I haven't seen it in a personal finance program.

> There's no decision making required.

Yes, there is.

> In my case, the loan payment amount

> was fixed. All that is needed is to compute the interest accrued and

> payable at the date the transaction is entered,

And what date would that be? The date the transaction shows in the calendar?
The date you hit send or print check? From a software standpoint, the 'date
the transaction is entered' is the recurring date you used when you set up
the loan.

Are you asking that Quicken dynamically calculate interest as of the date as
it appears in the register, after the transaction is recorded? Is the
software to examine EVERY transaction at the time it is recorded, to
determine whether it is a payment attached to a loan?

> and subtract that from

> the total payment amount to determine the amount of principle. My

> understanding is that the methods of amortization for consumer loans

> is set by regulation, so there shouldn't be any guesswork.

No 'guesswork' - just an implementation of programming for a dynamic (i.e.
changing) decision making capability. Again, certainly 'doable', but
probably not practical.