How to Record A Payment To A Loan In QuickBooks Online

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Previously I showed you how to add an equipment loan to QuickBooks Online

In this tutorial, I’ll show you how to record payments to that loan.

Quick Instructions:

Check payment:

  1. In the upper left corner click +New
  2.  Under VENDORS select Check
  3. Fill in the following:
    1. Payee: the bank you have your loan with
    2. Bank Account: the checking account the money is coming out of
    3. Payment date: date the payment was made
    4. Check no.: The check number or “ACH” if using an ACH payment
  4. Enter a line for your loan payment where CATEGORY is your loan and AMOUNT is how much was paid towards the principle
  5. Enter a line for your loan payment where CATEGORY is “Interest Expense” and AMOUNT is how much was paid towards the interest
  6. Click Save and Close

Adding a payment to the Bank Register:

  1. Click Accounting in the left-hand menu
  2. Select Chart of accounts
  3. Find your loan in the list of accounts
  4. Click View register on the right
  5. Click Add journal entry and add an entry for the interest:
    1. PAYEE: The bank you have your loan with
    2. ACCOUNT: Interest Expense
    3. INCREASE: Your interest amount
  6. Click Add journal entry and add an entry for the loan payment:
    1. PAYEE: The bank you have your loan with
    2. ACCOUNT: Checking account used to pay the loan
    3. DECREASE: Your check amount

Only use ONE of these methods for a payment! Whichever one works best for you.

Keep reading for full instructions with screenshots.

Paying a Loan with a Check

In this example, I’m going to show you how to add a loan payment using a check.

Click the +New button in the upper-left-hand corner. Under Vendors select Check.

Creating a new Check using the +New button in QuickBooks Online

For Payee enter the bank that you got your loan from. 

In Bank Account select the checking account this money is coming out of.

Enter the Payment date for the check.

For Check no. you can enter the number of the check or ACH if you made an ACH payment.

In Category Details, you’re telling QuickBooks why you’re giving your bank this money. In this case, it’s a loan.

In my example, I’m making a payment of $500. 

  • $425 for the loan
  • $75 for the interest 

To do this I’ll add two line items. One will have the CATEGORY of the loan I’m paying with an amount of $425.

The other will have a CATEGORY of Interest Expense with the amount of $75.

Here’s what it looks like:

Entering a loan payment as a check in QuickBooks Online

You’ll fill in the amounts for your loan according to your loan documents. The principle will be the loan payment line.

Viewing a Loan Payment on the Balance Sheet

After making a loan payment you’ll notice that on your balance the fixed asset amount is the same. 

While the Long-Term Liability loan has decreased by the amount paid.

Loan payment on the balance sheet in QuickBooks Online

Adding a Loan Payment to the Bank Register

Another way to add a payment to your loan would be as journal entries on the register.

To do this navigate to the chart of accounts by clicking Accounting in the left-hand menu and then selecting Chart of accounts.

Find your loan in the list of accounts and click View register to the right.

How to view the register of an account in QuickBooks Online

Click Add journal entry and add an entry for your interest:

  • PAYEE: The bank you have your loan with
  • ACCOUNT: Interest Expense
  • INCREASE: Your interest amount

Click Add journal entry again and add an entry for your loan payment:

  • PAYEE: The bank you have your loan with
  • ACCOUNT: Checking account used to pay the loan
  • DECREASE: Your check amount

In this method, you’re telling QuickBooks that your loan was increased by an interest expense and decreased by a check payment.

Either method will decrease the ending balance for your loan by the same amount.

In my example, both methods decreased my loan amount by $425.

Ending Balance on a loan register after making a payment in QuickBooks Online

You now know how to record a payment to a loan in QuickBooks Online.

Below is a video if you prefer to watch me show you how to do this.

If you have any questions about recording payments to loans in QuickBooks click the green button below to schedule a free consultation.

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