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Loan Manager

How Do I Delete or Remove an Existing Loan From Loan Manager?

Chief Mechanic · September 12, 2010 ·

To delete or remove an existing loan from Loan Manager, follow these simple steps:

  1. Open Loan Manager from the Banking->Loan Manager menu in QuickBooks
  2. Highlight the loan you want to remove by clicking on it in the Loan List
  3. Click the Remove Loan… button
  4. Click Yes in the Remove Loan? window

Here’s the main screen of Loan Manager with a single loan.  If the loan you want to delete or remove isn’t listed, the GL liability account is probably inactive.  In that case, close Loan Manager, make the GL liability account active, and restart Loan Manager.  Here’s the Loan Manager after the loan has been selected:

QuickBooks Loan Manager Loan Added

Here’s the Remove Loan? window:

QuickBooks Loan Manager Remove Loan

It’s important to understand that Loan Manager is primarily a tool to calculate payment schedules and to simplify the process of distributing interest and principal payments to the appropriate GL accounts.  When you create a new loan in Loan Manager, the outstanding balance for that loan will start as $0 – until you record a transaction in the liability account in QuickBooks itself. Once the liability account is increased to reflect the loan’s principal, Loan Manager can assist you to record the regular payments.  Likewise, when you remove a loan from Loan Manager, you are not making changes to the liability account balance.

Therefore, deleting or removing a loan by following these steps will not impact your financial statements or other reports produced by QuickBooks.

For more information on using Loan Manager, see our related articles on adding a new loan and recording a debt re-financing.

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How Do I Add a New Loan To Loan Manager?

Chief Mechanic · September 12, 2010 ·

To add a new loan to Loan Manager, there are some preliminary steps to make before running Loan Manager:

  1. Evaluate if this is a loan that Loan Manager can track.  Loan Manager doesn’t track interest-only loans, so if your loan requires you to make regular payments of interest over time and the entire principal in a single payment at the end of the term, Loan Manager isn’t the right tool
  2. Verify the liability account for the new loan exists in your QuickBooks chart of accounts and that it is active; if not, add it or change its status
  3. Verify the payment account (normally a bank account) which will be used to make payments on the new loan exists in your QuickBooks chart of accounts and that it is active; if not, add it or change its status
  4. Verify the expense account which will be used to record interest expense for the new loan exists in your QuickBooks chart of accounts and that it is active; if not, add it or change its status
  5. Verify the expense account which will be used to record other fees (such as bank fees) for the new loan exists in your QuickBooks chart of accounts and that it is active; if not, add it or change its status
  6. If your loan has escrow payments associated with it, verify that the asset account which will be used to record prepaid expenses (such as property taxes or insurance) for the new loan exists in your QuickBooks chart of accounts and that its active; if not, add it or change its status
  7. Verify the vendor or other name to which payments will be made exists; if not, add the vendor or other name
  8. Enter the journal entries in QuickBooks so the current balance of the liability account associated with your new loan equals the original amount of the loan
  9. Have in front of you the following information about the new loan: the origination date, the term, the interest rate, whether your lender uses daily compounding (and if so, whether it’s on a 360 or 365 day basis), the payment amount, the sequential payment number, the due date of next payment, and the escrow amount (if any)

Since Loan Manager reads information from your QuickBooks chart of accounts when it first loads, if the accounts required to set up the loan do not exist when Loan Manager starts, you won’t be able to set up the loan properly – even if you open a window within QuickBooks to add the accounts while Loan Manager is running.

Here’s the main window of Loan Manager:

QuickBooks Loan Manager Opening Window

To add a new loan, click the Add a Loan… button.  The Add Loan window, the first step in the process, appears.  Since we’ve already followed the steps in our checklist, our accounts already exist and the balance of our liability account equals the Original Amount of the new loan.  In this example, that amount is $200,000.00.  Choose your liability account and Lender (a vendor or other name) from the pull down menus.  Enter the Origination Date for the loan, the Original Amount (which in our example is $200,000.00), the Term and the type of number the entered Term represents (weeks, months, or years).

QuickBooks Loan Manager Add Loan

Once this information is correct, press the Next button to bring up the second screen in the process of adding a loan.  On this screen, enter the Due Date of Next Payment, the Principal Amount, and the Next Payment Number.  For a new loan, the Next Payment Number will normally be 1 provided that you’re setting up the loan before your first payment is due.  Choose the Payment Period (one of weekly, bi-weekly, semi-monthly, monthly, bi-monthly, quarterly, semi-annually, or annually) from the pull down menu.  Specify whether the loan has an escrow payment associated with it, and if so, enter the Escrow Payment Amount and the Escrow Payment Account.  The Escrow Payment Account is normally an asset account because escrow payments are being made in advance of the expense being incurred.  If you want QuickBooks to remind you before a payment is due, make sure the checkbox is checked.

QuickBooks Loan Manager Add Loan 2

Once this information is correct, press the Next button to bring up the third screen in the process.  Enter the Interest Rate for your loan as a percent.  Choose the Compounding Period for you loan, which will default to the Payment Period you entered on the previous screen.  You’ll also have the option of setting the Compounding Period to Exact Days to specify that your lender is using either a 360 or 365 day year to calculate interest.  If you choose this setting, you’ll have the additional option of specifying the Compute Period as either 365/365 or 365/360.  This information would normally be found in your original loan documents.  Choose your Payment Account, Interest Expense Account, and Fees/Charges Expense Account from the pull down menus.  Normally, the Payment Account is a bank account, such as a checking account.

QuickBooks Loan Manager Add Loan 3

When this information is correct, press Finish.  You’ll see a screen similar to the one below.  In our example, we added a new loan with a principal of $200,000 at a 10% interest rate, a 60 month term with monthly payments, and a $2,000.00 monthly payment.  Since this loan is not is not fully amortizing with those provisions, there is a balloon payment at the end of the term.  Clicking on the Payment Schedule tab will display the payment information for the loan; the Contact Info tab will display the relevant information for the vendor or other name we specified as the Lender.  This information is maintained in QuickBooks itself, not Loan Manager.

QuickBooks Loan Manager Loan Added

It’s important to understand that Loan Manager is primarily a tool to calculate payment schedules and to simplify the process of distributing interest and principal payments to the appropriate GL accounts.  When you create a new loan in Loan Manager, the outstanding balance for that loan will start as $0 – until you record a transaction in the liability account in QuickBooks itself. Once the liability account is increased to reflect the loan’s principal, Loan Manager can assist you to record the regular payments.  Likewise, when you remove a loan from Loan Manager, you are not making changes to the liability account balance.  Since we completed our checklist steps before running Loan Manager, which included recording the loan balance in the liability account, the balance was displayed correctly once we added the loan.  Had we not completed that step, the Balance column for our new loan would show the balance of our liability account, or $0.

For more information on using Loan Manager, see our related articles on deleting a loan and recording a debt re-financing.

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How Do I Record a Debt Refinancing Where I Use a New Loan To Pay Off Several Other Loans?

Chief Mechanic · September 12, 2010 ·

A common business situation is to use a new loan to repay one or more existing loans, possibly raising cash in the process.  This is commonly referred to as a refinancing.

QuickBooks includes a Loan Manager which can be run from the Banking->Loan Manager menu selection.  It’s important to understand that Loan Manager is primarily a tool to calculate payment schedules and to simplify the process of distributing interest and principal payments to the appropriate GL accounts.  When you create a new loan in Loan Manager, the outstanding balance for that loan will start as $0 – until you record a transaction in the liability account in QuickBooks itself.  Once the liability account is increased to reflect the loan’s principal, Loan Manager can assist you to record the regular payments.  Likewise, when you remove a loan from Loan Manager, you are not making changes to the liability account balance.

Therefore, the simplest way to account for a refinancing is to use GL journal entries.  To make these functions, access the Make General Journal Entries window from the Company->Make General Journal Entries menu selection.

QuickBooks Premier 2009 GL Make General Journal Entries

Let’s consider this example: a company is refinancing a building for $200,000, and is using the settlement proceeds to repay 3 other mortgage loans, pay the settlement expenses, and increase cash.  Each of the 3 other mortgages has an outstanding balance of $50,000, and there are 2 settlement charges that total $4,000.  That produces a net increase in cash of $46,000.  Here are the conceptual debits and credits to record:

  1. Enter a credit of $200,000 to the new mortgage liability account
  2. Enter a debit of $46,000 to the cash or checking account in which the net proceeds were deposited
  3. Enter debits to the expense accounts to reflect the settlement charges; in our example, there are 2 debits to expense accounts, 1 for $3,000 and 1 for $1,000
  4. Enter debits of $50,000 to each of the 3 existing mortgage accounts that were paid off with the settlement proceeds
  5. When you’ve entered all your debits and credits, click either Save & Close or Save & New to save your work

Here’s another look at those debits and credits:

General Ledger Distribution for a Mortgage Refinancing

The order that these debits and credits are entered on the Make General Journal Entries window does not matter provided that total debits equal total credits.

Once you’ve recorded this general journal entry, you can now run Loan Manager and delete the 3 loans that were fully repaid and set up the loan payments for the new loan.  Note that Loan Manager reads your GL chart of accounts when it loads, so if you’ve added any accounts while Loan Manager was already running to record the journal entries discussed, you’ll need to close and re-start Loan Manager before recording the new loan.  It’s a good idea to have a separate account for each loan to simplify reconciling that account in the future, so the new loan should get a new account.  The GL accounts must be active to be recognized by Loan Manager, so don’t make the GL accounts for the 3 paid-up loans inactive until after you’ve deleted them from Loan Manager.

The Account Name in Loan Manager is the liability account for the new loan, which in our example is “New mortgage liability account.”  When you select this account from the pull down menu in Loan Manager, it will automatically recognize the principal balance that was created with the GL journal entries you recorded.  Continue to set up the new loan and delete the repaid loans.

QuickBooks Loan Manager Add Loan

Once completed, your financial statements are correct, and you’re ready to use Loan Manager to calculate and distribute your loan amortization.

For more information on using Loan Manager, see our related articles on adding a new loan and deleting an existing loan.

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