# Handling Interest in Loan Accounts > Here's how YNAB calculates and applies interest in loan accounts, and how to troubleshoot or even edit the amount if it doesn't match your lender's calculation. Source: https://support.ynab.com/en_us/handling-interest-in-loan-accounts-a-guide-r1Y17LAkj Last updated: 2026-07-29T17:11:20.665Z Understand how YNAB loan accounts calculate and apply interest, distinguishing it from the principal in the payments. Discover how to troubleshoot if the displayed interest charge (compounded monthly) is different from your lender’s, including how to add or edit interest charges in the YNAB web app. #### This information only applies to accounts set up with the specific Loan account type! YNAB offers **Loan account** options for: * Mortgage * Auto Loan * Student Loan * Personal Loan * Medical Debt * Other Debt The instructions below will **not** apply if your account is set up as any other type (for example, a [Line of Credit](https://support.ynab.com/en_us/line-of-credit-accounts-a-guide-S10LHsqkl) account, a Liability tracking account, etc.). Here's more info about our [different account types](https://support.ynab.com/en_us/account-types-an-overview-BkmGM0qCq). #### In This Article [How Does YNAB Calculate the Monthly Interest Charge?](#interesthow) [How Is Interest Applied to the Account?](#applyinterest) [What if YNAB’s Interest Charge Doesn’t Match Your Lender’s Interest?](#interestwrong) * * * ## How Does YNAB Calculate the Monthly Interest Charge? When you borrow money, you end up paying back more than the initial amount due to interest—the cost of debt. Each time you make a loan payment, the lender takes some of your money as payment to themselves (interest), and applies the rest of the funds to the outstanding balance of the loan (or principal). YNAB loan accounts show you this breakdown of your payment. Loan accounts can be used as a planning tool, and they help show how much each loan costs in terms of interest and time. We designed the loan accounts around a standard amortization calculation, where interest is compounded monthly and each monthly payment is split and applied to interest and principal. Over time, the proportion of your payment that goes to interest decreases, and more of each monthly payment is applied to the principal balance of the loan, until it is paid in full. YNAB compounds interest monthly (regardless of the type of loan) by taking the interest rate, dividing by 12, and multiplying with the current balance. This is how the interest charge displayed in the loan Account Activity window is calculated. #### Interest in the First Month of a Loan Account In the first month of your loan account, the interest charge will be $0.00 because YNAB doesn’t know if a monthly payment has already been made that month. If you record a payment during the first month of a loan account, YNAB will calculate and apply interest to the payment, and a non-zero interest charge will appear in the Activity window. [Back to Top](#backtotop) * * * ## How Is Interest Applied to the Account? The monthly interest charge is automatically added to the loan account when you make a payment. YNAB deducts the interest charge from your payment and then applies the remaining payment funds to the balance. YNAB assumes the interest charge (and escrow or fees, if applicable) must be covered first, before any money goes toward principal. The entire monthly interest charge will be applied to the first payment you record each month. If you make weekly or biweekly payments, your first monthly payment may not impact the principal balance of the loan because YNAB will use those funds to cover the monthly interest charge. You can edit the interest charge to match the interest your lender charged for that first payment, or wait and update the interest charge at the end of the month to match the total amount of interest you paid that month. (Review the [How to Edit Interest](#edit) section below). YNAB will display the total amount of interest charged each month—it will not display individual interest charges.  If interest is accruing without payments, YNAB won’t add that interest automatically. You will need to add accrued interest charges using the following steps. (We recommend recording the accrued interest at the **end** of the month because some lenders compound interest on a unique schedule). ### How to Add an Interest Charge in a Loan Account (Web App Only) 1. Within the loan account, click _Add Activity_. 2. Click _Add Interest_. 3. Enter the amount of accrued interest your lender charged this month. YNAB will update the loan's balance and display the interest charge in the loan's Account Activity section. [Back to Top](#backtotop) * * * ## What If YNAB’s Interest Charge Doesn’t Match Your Lender’s Interest? As long as the account balance and interest rate in YNAB match the account balance and interest rate of your loan in real life, YNAB’s interest calculations will be pretty close over time. However, depending on how your lender rounds interest, how often your lender compounds interest, and when the lender applies interest to your loan, the interest charge in YNAB may not exactly match the interest you owe in real life. There is good news: you can edit the interest charges entered by YNAB using the web app or update the account balance, without affecting anything in your Plan tab. ### How to Edit Interest Charges in YNAB Loan Accounts (Web App Only) 1. From within the loan account, click on the estimated interest charge. 2. YNAB will give you a preview of what the new total of interest charged that month will be, and then you can edit the amount.  3. Click _Save_ when you're done.  4. You can edit interest charges (or escrow amounts!) in the current **and past** months.  ### How to Update Balances in YNAB Loan Accounts (iOS/Android/Web) ### iOS 1. Tap the _Accounts_ tab at the bottom of the app. 2. Tap your loan account. 3. Tap the edit (pencil) icon at the top right of the screen. 4. In the Edit Account window that pops up, tap and edit the _Working Balance_ field.  5. Tap the check mark to confirm. An adjustment transaction will be added to the loan activity. ### Android 1. Tap the _Accounts_ tab at the bottom of the app. 2. Tap your loan account. 3. Tap the three dots icon at the top right of the screen. 4. Tap _Edit Account_. 5. In the _Edit Account_ window that pops up, tap and edit the Today's Balance field.  6. Tap _Save_ to confirm. An adjustment transaction will be added to the loan activity. ### Web 1. From within the Loan account, click the _Update Balance_ button in the top right. 2. In the window that pops up, click _No_. 3. Enter your current balance and click _Next_. 4. Confirm your interest rate and click _Next_. 5. Confirm the difference between YNAB and your updated balance and click _Next_. 6. Click _Done_. An adjustment transaction will be added to the loan activity. Is the estimated interest charge frequently incorrect? If so, you can work through these troubleshooting steps to make those estimations as accurate as possible: ### How to Troubleshoot the Interest Charge Amount 1. **Are the account details correct?** The interest charge is calculated based on the balance you owe and the interest rate. If the interest charge is incorrect, check the account details by hovering your mouse pointer over the account name and clicking the pencil icon when it appears. Make sure the interest rate and current balance are accurate, and adjust them if necessary. 2. **Is the difference between the Interest Charge in YNAB and the interest you paid in real life very small (less than $1)?** If so, this is likely due to how YNAB rounds vs. how your lender rounds the interest calculations. You can change the interest charge amount when there is a rounding difference. 3. **Does your lender compound interest non-monthly?** YNAB loan accounts are designed around an amortization formula that compounds interest monthly. If your lender compounds interest daily, or quarterly, or on another schedule, the interest calculations in YNAB may be slightly different from your lender’s interest. We recommend using an Equivalent Interest Rate calculator to determine the equivalent monthly interest rate for your loan. Enter this rate in YNAB, then wait until the end of the month (or the end of the quarter) to compare your YNAB loan account to the real-life loan. Waiting until the end of the month will help ensure you’re considering the total interest your lender and YNAB have charged over that time period. The two should be pretty close, and you can edit the total amount of interest charged each month, if necessary! 4. **Do you make frequent (weekly, biweekly) payments?** YNAB will apply the entire monthly interest charge to your first monthly payment. If you pay weekly or biweekly, your lender may charge interest on each payment. For these payment schedules, we recommend waiting until the end of the month to edit the total interest amount to match the amount you were actually charged for the whole month. 5. **Is this an offset mortgage?** Offset mortgages calculate interest using the mortgage balance less the balance of a separate (offset) account. The YNAB loan accounts calculate the monthly interest charge and loan payoff details using **only** the balance of the loan and the interest rate. Because of this, loan accounts aren’t a good fit for offset mortgages. We recommend setting these up as tracking account types instead. Depending on your specific scenario, check out our resources for [**Negative-Balance** Offset Accounts](https://support.ynab.com/en_us/negative-balance-offset-account-setup-HkPKvOCc) or [**Positive-Balance** Offset and Redraw Accounts](https://support.ynab.com/en_us/positive-balance-offset-and-redraw-accounts-rk11XHIlh) for more!  [Back to Top](#backtotop) * * * ## Help Us Help You! Our Knowledge Base team reviews article feedback responses weekly, and we actively revise these articles to make them as helpful as possible. That's where you come in! Our articles are scored based on the _Yes_ or _No_ ratings received below. We also collect freeform feedback for any _No_ ratings (so our team can focus in on what you were specifically searching for!). **Success**: Found what you were searching for? 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