What the Loan Manager does:
When a loan is repaid in regular fixed payments, this repayment usually includes 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). It also allows you to make payments for either the regular scheduled amount, or additional payments, and to run "what-if" scenarios to compare different loan choices.
The Detailed instructions below provide information on how to use Loan Manager to track loans and repayments in QuickBooks.
Prepare the use the Loan Manager:
Before setting up a loan in the loan manager you will need to set up one or more accounts in QuickBooks: one for the loan itself, one for interest expense and one for escrow if applicable. You will also need to make sure you have the lender set up as a vendor.
Create a loan account in your chart of accounts.
Record the initial loan amount. You can do this either by entering the total amount as an opening balance in the New Account window itself, or as a transaction such as a journal entry. Entering it as a journal entry gives you the most flexibility. In either case, make sure the date you enter is the loan origination date.
If payments have already been made against the loan you will need to enter these as well in the form of checks, bills or journal entries.
Next, set up an Expense type account for Interest payments and another for Fees and charges, if none already exist.
Then create a Bank type account for Escrow payments if necessary.
Add a vendor for the bank or financial institution issuing the loan, if it does not already exist in QuickBooks.
Now you are ready to set up the loan in the Loan Manager itself.
To open the Loan Manager, select Loan Manager in the Banking menu. This opens the main Loan manager window.
Click Add a Loan to begin setting up the loan.
On the first screen entitled Enter account information for this loan:
On the next screen entitled Enter payment information for this loan:
On the next screen entitled Enter interest information for this loan:
You can click Edit loan details to change any of the information you entered when setting up the loan.
The loan details you entered show on the Summary tab at the bottom of the Loan manager.
Click the Payment Schedule tab to view the amortization schedule, showing calculated principal and interest for the full term of the loan. Note the varying amounts of Principal and Interest over the life of the loan.
When you wish to make a payment against the loan, click Set up payment.
You can use the What if scenarios tool to view the effects of other payment amounts, repayment period etc.
To use this tool: