Loan Car payment, tracking principal and interest (loan debt cost), How do you guys do it?

Question

Hello all,

Do you guys track how much of your car payment is going to principal and how much to interest (or your mortgage)?

I’m trying to figure out how much my debt and liabilities (my loans) are costing me in Simplifi and I have a hard time doing it.  I do know that Simplifi right now is not downloading transactions for the loans from the banks, and currently the only way is to track it manually.  ….    But what is the best practice to do this?

This is my first attempt and what I’m thinking:

* Use internet calculators (or spreadsheet software) to see what portion (how much) each payment is going to principal and how much is going to Interest. (Loan Amortization Chart)
* In Simplifi, setup a manual account in Liabilities for the car loan; for example, name it “2023 Honda Civic Loan”
* Every time the payment happens from my checking, the payee would be the bank that the loan is from and make the category as a transfer to the loan account.  For example:  Payee: Citi Bank, Category: 2019 Honda Civic Loan 
* In the car loan account, set up a manual bill as payment for interest to the bank. Then the payee is the bank that has the loan, and the category is “Bank fee - Loan Interest”* The tricky part is that with every payment, the principal and how much is going to the interest changes.
* If it is a 6-year loan, I can average how much the interest is for a year, divided by 12 and make that monthly charge so the reports in Simplifi reflect somewhat accurately each month.
* Then I would change the amount of average interest every year to a new average.

What do you guys think?  How many of you are tracking interests on your debt and loans and how do you do it? How about Mortgage?

EL1234 · Answer

I do similar with my mortgage payment but I have the recurring transaction (from my bank) set up with the category of Mortgage Interest. After the monthly payment goes through, I log into my mortgage company's online portal and from there I get the breakdown, and then I split the transaction into 3: Mortgage Interest (an expense), Transfer to my Mortgage Account (a manual account) for principal, and Transfer to another manual account for the Escrow. After doing that, I double check that Simplifi's account balance for both the mortgage account and the escrow account match what I see in my mortgage company's portal.

Yes it's more manual work than what you suggest but I don't mind since it's only once a month, and like this I know that at any given time my numbers are accurate. But definitely choose an approach that works for you!

DryHeat · Answer

I suggested a work around for this on another thread, but can't find it now.

Basically, it's just like what you plan to do — using a recurring transaction that splits the loan payment between your best guess of the monthly amount applied to principle and your best guess of the monthly interest.

Then, at the end of the year, check your statement against your accounts and make an adjusting transaction in your loan account. For example, if too much went to interest you would make a transaction reducing your loan balance using the category "Bank fee - Loan Interest." Or the opposite (increasing the loan balance) if you earmarked too little for interest.

That way each month may be off by a little bit, but at the end of the year the interest and the loan balance will be correct.