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Community Discussion: When will QUICKEN have a simple interest loan option (i.e. Compounding Period of NONE)

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John Pollard

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Apr 2, 2023, 12:11:22 PM4/2/23
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Community Discussion: When will QUICKEN have a simple interest loan option (i.e. Compounding Period of NONE)

Found at: https://tinyurl.com/bdzj39vx

Too often the urge to complain about a problem interferes with the necessity to think about why the problem exists, and what might its possible "solution" be.

The users in the referenced discussion either do not understand, or do not care about, the true differences between a simple interest loan (which Quicken cannot handle) and a traditional mortgage loan (which Quicken handles accurately).

[One user goes so far as to say, " ... I can't actually true up my auto loan in quicken and it assumes that I'm throwing extra money at principal (with no ability to override where the excess goes) ...". That statement is false: every Quicken loan payment transaction can be modified to have the correct principal/interest split (or any other split, such as one that includes escrow). That means that every simple interest loan can be accurately tracked in Quicken, but that the user will have to supply the correct loan payment details.]

[From a link to a BofA description of simple interest loan calculations, provided by another discussion participant: "Interest on your loan accrues daily. It is for this reason that the portion of your monthly payment allocated to interest may fluctuate".]

As noted in the BofA link: The amount of interest for each payment in a simple interest loan is calculated based on the number of days between the current and previous payment. What the BofA link does not make clear is that number of days is NOT the number of days between the "scheduled" payment dates (as shown in a loan payment schedule); it's the number of actual days between the dates each payment is made ("made" being when the lender receives/records the payment - frequently not the payment date in the loan payment schedule).

It is virtually impossible that every payment made on any loan will be made exactly on the date it is "scheduled" (due) in the loan payment schedule. Since Quicken has no way of knowing exactly when each payment is "made", Quicken has no way to know what the actual principal/interest split is for every simple interest loan payment.

[A traditional mortgage loan, unlike a simple interest loan, has "true" fixed principal/interest splits for every loan payment. Those splits can be computed and placed in a loan payment schedule that can be expected to contain the actual principal/interest splits for every loan payment. This works because there is a window (typically 10 days) when a traditional mortgage loan payment can be made and not be late. If a payment is late, the principal/interest split does NOT change: the borrower is just docked for a late payment, which is a separate transaction.]

Quicken users have two choices for simple interest loans:
- They can start with the payment schedule that Quicken computes and modify each payment transaction (after the payment has been received by the lender, and the principal/interest amounts are known) to have the correct split - this approach assumes the user sets up a manual loan account.
- They can choose to set the loan account up for downloading (if the lender allows). Downloaded loan account registers contain a single transaction (a balance adjustment transaction) that is modified to reflect the "current" loan balance, each time the download indicates the loan balance has changed. If the user wants to also have a record of the principal/interest split for each loan payment transaction, they will have to manually create each payment transaction, with the correct split, from scratch (the user can employ a Memorized split transaction that has the correct categories/tags and modify the amounts of each split line each time a payment transaction is recorded in Quicken).

[Last Community post: April 2, 2023 @ 6:45AM]
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