"Principal Transfer" is just like "Transfer" and "Credit Card Payment"--it's how the app denotes money moving from one account to another. When you setup a loan/scheduled "Loan Payment", it's implicit. You don't need to define it. If you go through the detailed
setup, just tell it there is some category for interest expenses, and let it create the scheduled payment, Money will do the rest. You can even setup the scheduled "Loan Payment" to be entered into the registers sutomatically.
You don't necessarily have to put in any transaction splits manually; for loans with simple interest amortization, Money should track pretty closely to the bank in computing interest expenses, thus principal balance reductions. You may choose to update the
Money calculated interest amounts in the transactions using the real amounts from the bank's statements. Just edit the transactions in the register like you'd edit any other transactions.
For loans that started months or years before you set them up in Money you have several options and considerations. First, the wizard will ask if payments have been made then if you want to record them all or just the ones for this year. Then it will ask
you when the first payment was made.
If you've told it to record payments just for this year, it's not going to allow the first payment date to be before this year unless you roll the computer's date back--and of course it then won't record the payments to the real present day. It's also going
to expect you tell it the balance from the previous year ending statement not what you borrowed originally.
In either case, it will compute out and enter the payments from that original loan amount or previous year ending balance. It enters these historic payment without the "Principal Transfer" account being specified since that would presumably
throw off that account's balance. But it does note them.
You can always adjust a Loan Account balance by entering a transaction by hand in the Loan Account register that increases or decreases the balance to match a recent statement balance. If Money's amoritization differs slightly from the bank, this will get
them back in sync.
You can always create a new data file or open the sample file and play around if you want to know how setting up an account certain ways will be treated by Money.
