Re: Loan accounts

No, the MD loan calculator is a simple one. However, you can do a lot 
with Excel. I put together a sample amortization schedule calculator. See

http://paleo.org/private/AmortizationCalculator.xls

It's a quick thing so I include a caveat that you must verify the 
calculations independently, but it worked in the tests I did. Note 
that it will not compute loan targets (principal, interest rate, 
payment, or duration); it just computes the amortization schedule 
with arbitrary additional payments. It only does monthly payments, 
though changing it to handle payments at other intervals would not be 
difficult. It displays values using the $ sign, but it's 
currency-agnostic. (Actually I'm not sure -- it may use the system 
settings for the currency sign.)

Loan points, as Edward Melia already pointed out, are a fee. However, 
they are not a pure fee, but a hybrid of a fee and a lump interest 
payment. At least in the US, the APR on the loan must be calculated 
as though points are interest. This makes sense, because the reason 
for paying points, when optional, is usually to reduce the stated 
interest rate -- but it can result in confusion because the reported 
APR differs from the advertised APR.

For example, about ten years ago I took out a mortgage, and paid 3 
points (about $3000 on a $99,900 mortgage) to lower the interest rate 
from 6.5% to 5.75% -- made sense in my situation, which was that I 
planned to stay in the house for a long time. Generally it makes 
sense to pay points to lower the interest rate if you are going to 
pay on schedule for a decade or more, but not if you expect to sell 
(or otherwise pay off the loan) in two or three years. (Points are 
not always optional, but I would avoid a lender which required me to 
pay points unless the deal were very good and the lender very reputable.)

>I would question the usefulness of having 'loan accounts' in 
>Moneydance at all. It would be better to let the user invent a 
>policy for dealing with the figures that agrees with the methods and 
>terminology used by the lender.

For your balance to have so large a discrepancy, I suspect there must 
have been a discrepancy in the setup. I've seen balances off by 
several dollars, but nowhere near what you have. I don't completely 
trust the loan principal balances that MD shows, but they have been 
pretty close.

I've wondered whether a more flexible setup, allowing the user to 
pick various parameters to specify the details of the lender's 
calculations, would work. Or if it would be possible to compute the 
lender's method of calculation from the first two or three payment 
breakdowns. I have not studied loan practices enough to know. (And 
it's unlikely that I will.)

Larry Stone wrote:
>You can always "roll your own" and enter it as a credit card. Have 
>all payments apply to principal and then add the interest to the 
>balance as you see it on statements. Moneydance won't be allocating 
>payments between principal and interest for you but that would 
>probably be easier for you to keep in sync with the bank.

You don't even have to call it a credit card. Enter it as a loan but 
do NOT set up the transaction reminders to enter automatically. 
Instead, wait until you get the payment details, then adjust the 
principal and interest before entering the transaction. This of 
course is a brute force method and not as easy as a better 
calculation, but it works.

Edward 

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