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For the complete documentation index, see [llms.txt](https://docs.kick.co/llms.txt). This page is also available as [Markdown](https://docs.kick.co/common-workflows/loans.md).

Loan payments need special handling in Kick because each payment is made up of two parts - principal (reducing what you owe) and interest (an expense). If you record the full payment as a single expense, your books will overstate your costs and your Balance Sheet won't reflect the correct loan balance.

### Why it matters

When you make a loan payment:

- The **principal** portion reduces your liability on the Balance Sheet - you owe less

- The **interest** portion is an expense that appears on your P&L

Recording both correctly keeps your Balance Sheet accurate (showing what you actually owe) and your P&L honest (showing only the real cost of borrowing, not the full payment amount).

### What you need

Before setting up loan accounting in Kick, you need your **amortization schedule** - the breakdown of each payment into principal and interest. Your lender provides this, usually at loan origination or available in your online account portal.

### How to record loan payments

**If your lender sends separate line items** for principal and interest, categorize each one directly to the right account.

**If payments come through as a single amount**, use [Splits](https://docs.kick.co/common-workflows/splits) to divide the payment:

1. Open the loan payment transaction
2. Click **Split**
3. Allocate the principal portion to your loan liability account
4. Allocate the interest portion to your interest expense account
5. Reference your amortization schedule for the exact breakdown

**To automate this for fixed payments** (like a fixed-rate mortgage or car loan where the split ratio is consistent), set up a Split [Rule](https://docs.kick.co/common-workflows/rules). Kick will split the payment automatically every time it syncs.

### Recording loan proceeds

When you receive a loan, the funds coming into your bank account are **not income** - they're a liability. Categorize the deposit to your loan liability account so it appears correctly on the Balance Sheet, not on your P&L.

### Multiple loans

Keep separate accounts for each loan so you can track balances and payments independently. Your accountant can set these up in your Chart of Accounts.

### When to bring in a partner

If you have multiple loans, years of history to catch up on, or you're unsure about your amortization schedule, this is work worth handing off. A bookkeeping partner can set up the accounts, enter historical payments correctly, and reconcile each loan to your lender statements.