} Payments are payments, whether coming in or going out. However, it's less } confusing if we use "receipts" for incoming payments on loans. When I read } "loan payments", I automatically think of outgoing payments - money I pay, } not money I receive. And for payments I receive, the "payee" is ME; the } borrower who is repaying money to me is the "payor" (sometimes spelled } "payer").
I agree -- in this case it is a completely private transaction. I loaned a neighbor some money, with a proper loan document and lien on their house and everything. Right: I am the payee and my neighbor is the payer.
} Quicken doesn't help much in keeping these terms straight. "Loan account" } gives no clue as to whether the loan is a Loan Receivable (my asset that } somebody owes me), or a Loan Payable (my liability that I owe to someone).
Yeah, I bet their "business" versions are better about this kind of thing.
} Does your bank even know how much of each payment is interest? If they are } simply collecting the total "payment", which includes both P&I, then it is } up to you to do the accounting for each payment.
The bank doesn't even know it is a loan payment; it is just a deposit I make from the Payer to my account. I typically have several deposits to make a the same time and so I split the deposit in my register.
}... And then make an entry to } record the interest by increasing the loan receivable balance and increasing } your Interest Income category. If the payor has overpaid by $10, the amount } left to reduce the principal will be correct if you subtract interest from } the total payment.
Actually, quicken seems to do this OK. *IF* it is a single deposit. It sets up the loan as another "account" and it is associated with an account [which is a bit shortsighted, since I could deposit the received payment in any account, but their model is that *you* are the payer and you're set up to make your loan payments _from_ a particular bank account [but even that is pretty myopic]. I forget the details, but if I do the right this with the deposit, it'll ask me "is this the Oct 1 payment to the loan". If I say "yes" it actually enters the deposit *already*split*, with an internest-income entry and the rest deducted from the principal. I'm assuming that they're calculating the interest correctly...:o)
I've also noticed that Quicken has essentially no machinery for generating the end of year info that the "payer" will need. [I don't think I need anything fancy: the income is already split into loan payment and interest income and that's probably all my account will need -- I'm going to ask him about that this week]. But the 'payer" would probably like something more akin to what the banks generate. From what I can tell I can do that with two reports, both of which I'll send to my account and see if he can turn them into something more "proper" looking: by limiting category and payee I can get a listing of all of the "interest income" from the payer, and I can also get a statement of the principal reduction. I *think* those two are all that'll be needed.
Thanks!
/Bernie\