Manage a loan in Xero

Set up a loan or mortgage in Xero as a bank account or non-current liability. Talk to your accountant or bookkeeper about the right choice for your organisation.

What to consider when setting up a loan in Xero

If your loan is from a bank or other financial institution, you can set it up as a bank account in Xero. It must meet one of these conditions:

Otherwise, set it up as a non-current liability.

You may also need to set your loan up as a non-current liability if:

  • You would like to keep track of your current ratio on the Business Performance dashboard. The current ratio won't be correct if your loan is set up as a bank account.
  • You need to create manual journals for your loan account. You can't make manual journal entries to a bank account.

Set up your loan as a bank account

  1. Add a bank account in Xero for your loan account.
  2. Either:

  3. If your organisation is new to Xero, enter the loan's principal balance on conversion date in your conversion balances.

You may want to:

Set up your loan as a non-current liability

  1. Add a non-current liability in your chart of accounts.
  2. Enter the opening loan balance in one of these ways:

Split loan payments into interest and principal

Consult your accountant or bookkeeper if you need to split loan payments into interest and principal components.