This guide is written with MoneyWiz for Desktop in mind. Need one for Mobile? Click here!
Because we aim to make MoneyWiz the complete finance-management suite, we've also introduced the feature to track loans inside the application. You can track your mortgage, car loan and any other loan with APR automatically applied, as well as smaller, more personal loans.
Creating a loan with APR
To begin, start creating an account, select manual type and proceed with Loan account from the picker. Please note that loan accounts are not supported for Online Banking feature at this time.
You'll be asked to provide some information about your loan:
- Name: this is the name of the Loan account. You can type in whatever feels descriptive enough. For example "Auto Loan".
- Principal amount: that is the amount of loan which you signed a contract for with your banking or other financial institution; it doesn’t include any interests or down payments.
- APR %: APR stands for "Annual percentage rate", it usually includes both the interest and all additional bank fees around your loan (if you wish to create an interest-free loan please see this guide).
- Duration: most loans are paid off on a monthly basis, so set the duration with number of months.
- Start date: this is the date when you signed the contract.
- First due date: this is the date when you are required to make your first payment towards this loan; note that it’s important to set those correctly as even if you start date and first due date are different, you will be accountable for interests during the time between these two dates and that later affects your entire payment schedule.
Notice that at the top, there are Basic and Extended tabs. In the Extended tab, all options are the same as for the other types of accounts, but there is one additional option called "Payment Plan". Without filling out the properties of your payment plan you will not be able to complete the Loan account creation.
Here you will be required to fill out:
- Account used for payments: this is necessary so that MoneyWiz can automatically create for you a scheduled transfer and register your past payments towards this loan.
- Category for principal: based on the transaction amounts towards the principal category, the app will calculate the balance of your loan account; this is needed because you make payments consisted of principal and interest, but only the principal part is affecting your remaining balance.
- Category for interest: this is needed so that app can make reports regarding your interest payments – this can help you make important decisions about your finances. Please note that it cannot be the same as the category for Principal.
- Payee: this is an optional field; you may want to select as payee your banking institution.
- Plan type: there are 2 options here – Equal payments and Custom plan, these will be explained later in this guide.
- Payment schedule: with the information that you’ve entered so far MoneyWiz can make a good prediction of what your payments should look like. The payments are calculated as an amortizing loan – more on this particular type of loan will be explained later in this guide.
The monthly payments are calculated as an Amortizing loan. You can refer to Wikipedia to find out what exactly that means if you are not already familiar with the term. Please, note this algorithm takes your principal amount, annual rate and number of monthly payments and additionally we include the extra interest that you pay for the period between the start date and the first due date.
Please, contact us in case you have a loan that is not an amortizing loan – we are open to providing more algorithms for calculating the loan payments.
Notice the Payment schedule button. Click on it to see the entire payment schedule for your loan. You can click on each monthly payment and it will be opened in a new page and allow you to change it. If you selected "Equal payments" for plan type, you will not be able to change the Payment amount of any monthly payment. If you selected "Custom plan" you are allowed to change everything about all of your payments.
In both cases in order to save the entire payment schedule, please make sure the total principal amount on the bottom of the list is equal to the principal amount that you initially entered.
To create the account, just save your changes in the Payment plan and use the Create buttons. MoneyWiz will ask you whether to register past payments for the loan account - but only if your first payment date is in the past. If you agree, MoneyWiz will create past transactions for you:
Please note that the balance of the Loan account is affected only by the amounts in the principal category, while the balance of the account used for payments is affected by the full amount of the payments.
I can't create loan account - the payment plan button is flashing!
As we've noted earlier, your interest and principal categories need to be different. Otherwise reports would not be meaningful.
The loan formula
Please check the attached spreadsheets (in Excel .xlsx and Open Document Spreadsheet .ods formats) for the formula MoneyWiz uses in calculating your loan.
The thing that those spreadsheets don't account for, but MoneyWiz does, is that the lender may give you a longer period between signing of the loan and the first due date. If that number is more than 30 days, the app will adjust the entire payment schedule to account for the increased interest in the beginning. If the difference between start date and first due date is exactly 30 days, then the calculations would be exactly as on the spreadsheet.
Transactions toward loan accounts
The transactions towards Loan accounts are a special type of transactions – these are transfers which allow you to enter category and payee and be split by categories to handle separately principal and interest.
You can manually create transactions towards Loan accounts and enter principal only or interest only payments. Additionally you can create more scheduled transactions towards your loan account (in case you and your spouse are paying off a loan together, but from separate accounts).
Paying off a loan
Once you are done paying off your loan the balance of the Loan account in MoneyWiz will reach 0. Please, note that deleting the Loan account at this point is not a good option since it contains transfer transactions and deleting those will affect the balances of your other accounts. A better option is moving the account to a group where you keep your retired accounts (old and no longer used accounts). This way the paid off loan will not get in the way of your daily operations, but you will get to keep the history of your transactions.