When a loan is repaid in regular fixed payments, these repayments usually include both compounded interest and principal installments for the period.
As each successive payment is made, the interest portion gradually decreases and the principal portion increases. The QuickBooks Loan Manager creates an Amortization schedule for the duration of the loan, showing how much of each payment is applied to principal, interest and escrow (additional fees related to the loan). Also, it allows you to make payments for either the regular scheduled amount or additional payments and run the"what-if" scenarios tool to compare different loan choices.
Before using QuickBooks Loan Manager, set up the following accounts and vendor in QuickBooks Desktop.
What is Escrow?
Escrow is a specific portion of a loan that is held in an account by a third-party until the conditions of the loan are met. An Escrow Account is a QuickBooks Asset Account that tracks the escrow portion of a loan payment. Escrow accounts are commonly used to pay taxes and insurance.
To setup an Escrow Account:
You can use the What if scenarios tool to view the effects of other payment amounts, repayment period etc.