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

"Lisa B." wrote in news:45be47fa$0$4201$ snipped-for-privacy@news.astraweb.com:

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

scott s. .

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.

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.

"L" wrote in news:rKHvh.4$ snipped-for-privacy@newsfe12.lga:

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.

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. .

Lisa:

Pardon me for asking what could be a stupid question;

Is the compounding period of your loan set up in Quicken as Daily instead of the default of Monthly?

Bob

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.

In most common loans, the payment due date defines the amount of interest accrued and payable. While I'm not sure about other loans, but mortgages have a "grace" period for each payment and a delay in payment is still the same principal and interest split. Going into late periods changes the payment because not only may the split change, it also adds late charges.

"Bob Wang" wrote in news:KP-dnbSzfLWHNCLYnZ2dnUVZ snipped-for-privacy@comcast.com:

I'm not Lisa, but yes, in my case the compounding period is set as daily, but that isn't the problem. It only computes the amortization based on monthly payment, maybe using the 360 rule. If you always make the payment on the exact day, then the computed interest would be correct. I think that is the sam problem as Lisa is having.

scott s. .

It would be more precise to say it computes the amortization based on the pay periods entered when setting up the loan. That is, you give the software information as to principal amount, interest rate, and compounding period, and Quicken sets up an amortization schedule based on those variables. The payments from the amortization calculation can be scheduled and entered automatically.

Yes, it is. And it is not a bug.

What you are both asking for is a program that does DYNAMIC calculations for payments based on variable payment dates. While it is certainly possible for this type of calculation to be done (otherwise, your bank would not be able to accurately calculate your interest each month) it is probably not practical to program within a personal finances program. Within the framework of Quicken, for example, the program would have to examine EACH scheduled transaction to check if it had a loan attached, and recalculate interest base, not on the amortization schedule, but on a variable date.

Even if Quicken COULD do that, however, it would still not match the bank statement. Why? Because the bank will calculate what is owed based on the date RECEIVED, not the date PAID.

Yes, there is.

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?

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

"L" wrote in news:ON6wh.5$ snipped-for-privacy@newsfe12.lga:

You keep saying "decision making" but there isn't any decision. You compute the interest as of the date of the transaction. I'm not expecting Quicken to make a decision about when the transaction should be posted, just that it properly compute the interest. This isn't some esoteric loan; it is a standard consumer loan I got from Bank of America.

scott s. .

I think the problem is that Quicken uses the 360-day year instead of the 365-day year that almost all banks use. Also, Quicken does not adjust the principal based on the interest, but sets a standard principal payment. I never had these problems with Microsoft Money, but since switching to Quicken, I have had nothing but problems with loan interest calculations.