Guide 03
Setting up loans
A loan profile tells Loanbooq which Xero account holds the loan, what rate it carries, and how its interest is worked out. Add them one at a time, or a whole portfolio at once from the Excel template.
Adding loans
Open Loan Profiles and check the organisation shown is the right one. Then either:
- One at a time: choose + Add Loan, pick the account from the organisation's chart, fill in the terms and save.
- Many at once: choose Download Template, fill in a row for each loan, then choose Import Excel. Loanbooq checks every row and warns you before an import would change how an existing loan's interest is worked out.
What each field means
| Field | Meaning |
|---|---|
| Account | The balance sheet account in Xero that holds the loan. Each loan has its own account. |
| Loan type | Asset for money lent out, where interest is income. Liability for money borrowed, where interest is an expense. |
| Rate type | Fixed, linked to a reference rate, or blended. See below. |
| Interest type | How interest builds up. See below. |
| Charged | In arrears, at the end of each month, or in advance, at the start. |
| Interest account | The income or expense account the interest is posted to. |
| Loan limit | Optional. The Dashboard and the Post page warn you as the balance nears it. |
| Tracking | Optional. A Xero tracking option, such as a fund or region, put on every journal the loan posts. |
Rates
- Fixed rate: one annual rate, which you can change from a date.
- Linked to reference rate: the organisation's reference rate plus a spread, for example prime plus 1.5%. When the reference rate changes, the loan follows from the same date. See Reference rates and prime.
- Blended: the average of several rates, such as a 7-day and a 32-day call rate, used as one loan rate.
To change a rate, choose Manage on the loan, then Rates, and add the new rate with the date it takes effect. Months already posted are not changed.
Interest types
| Type | How it works |
|---|---|
| Simple | Interest on the capital only. Interest already charged never earns interest, and a repayment settles interest owed before it reduces the capital. |
| Simple, capitalised monthly | Worked out day by day within each month. Once a month's interest is posted to the loan account it becomes part of the balance and earns interest from then on. |
| Compound daily, weekly or monthly | Interest compounds every day, week or month within each month, and is posted to the loan account monthly. |
| Compound yearly | The rate is the effective annual rate. Interest is still posted monthly, at the monthly rate that compounds to the stated rate over a year. |
You can change a loan's interest type for the months not yet posted, under Manage, Rates. Loanbooq warns you first if interest is already posted.
Managing a loan
Each loan on the Loan Profiles list has a Manage button. It holds everything you can change about the loan:
- Rates: rate changes, the interest type and the interest start date;
- Limit: a ceiling for the balance, with warnings as it nears it;
- Tracking: the Xero tracking put on the loan's journals;
- Xero account: the account in Xero that holds the loan;
- Delete loan: removes the loan from Loanbooq. Nothing in Xero changes.
How interest is worked out
Interest accrues daily on the balance in force each day, on a 365-day year. For simple interest:
For example, R100,000 at 12% for 30 days is R100,000 × (0.12 ÷ 365) × 30, which is R986.30. Repayments and drawdowns change the balance from the day they happen.