Tracking Loans

If you've got debt, that's probably one of the reasons you thought, I need a budget. Your budget is exactly the tool you need to pay it off.

You've got two choices to track and organize your debt-payoff-bonanza in YNAB – the key is whether or not you add the debt account in YNAB.

Method 1: Just the Payments

To pay off a debt, all you really need is to make sure you're budgeting for the payment (or more!). You don't need to worry about tracking the debt in YNAB, and you don't need to worry about tracking interest, splitting payments, or anything like that. Just. Make. The. Payment.

1
Create a category to budget for your loan payment.
2
Don't set up your auto, student, or other loan in YNAB.
3
Sit back, relax, and enjoy the simplicity of having not set up your auto, student, or other loan in YNAB.
4
Budget for your payment each month by assigning money to the category from Step 1, pay it on time, laugh at debt.

Method 2: Debt Account Included

Sometimes, you have to track everything. It's okay. This method isn't simpler, but that's why Tracking accounts exist. And if being able to see debt balances go down on your Net Worth Report helps you deal with your debt, well hey, there's no one judging you!

1
Create a category to budget for your loan payment.
2
Add a new account to represent your auto, student, or other loan in YNAB (selecting Liability as the account type), with the amount you owe as the account's starting balance.
3
Budget for your payment each month by assigning money to the category from Step 1.
4
When it's time for your payment, create a transfer from your main spending account to the loan account. Categorize the transfer with the category from Step 1.
5
When you are charged interest on the loan, enter an outflow transaction in the loan account, and the balance will be updated to the full amount you owe.

An example transaction is added to the loan account, with Interest as the payee and $38.70 in the outflow column.

Do you pay fees on the transfer to the bank?

If your bank charges a fee on each transfer, you can account for that fee with a Split Transaction. You can split the transaction and follow Step 4 above to use the Transfer Payee for the portion of the transfer that will affect the Tracking Account. On the next line, categorize the fee as a regular outflow from the same category. The fee portion of your transfer won't affect the Tracking balance. 

$1,000 split transaction is added to Checking, with $500 transfer to the Mortgage, and the other $500 with Lender as the Payee.

Handy tip: You can use your bank's name as the payee for the fee to track those in your reports 😉

Method 3: Money Owed To You

Sometimes, you may find that you are the one lending money to someone else. While there’s no set way to handle that in YNAB, we have a few suggestions!

1
If you receive payments regularly, use a scheduled transaction. Create an inflow for the amount you expect to be paid on each specific date. When the transaction comes up in your register, you can either approve it or use it as a reminder to reach out to your friend or family member. 😉
2
Use the memo field. The memo field is great for keeping track of the total of the loan and how much is still owed. For example: "John’s Loan - $800/$1000 remaining." You can update it with each payment you receive!
3
Set up a Tracking Account if the loan is long-term. Use the total loan amount as the starting balance (it should be an Asset, since money is owed to you), and make an adjustment to the loan’s balance when you receive payment. Don’t forget to also add the inflow payment to your checking account!

Click Reconcile, then enter the amount your friend still owes. YNAB will adjust the balance

When the loan is paid in full, you can delete the tracking account. If you do use a tracking account, it will affect your net worth, but you can always exclude that from the report if you’d like.
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