Tracking debt properly means understanding that each loan payment splits into interest and principal, recording the debt on the same balance sheet as your assets so net worth is true, and being able to compare payoff strategies before committing to one. A balance in a banking app tells you what you owe today; it does not tell you how a payment is divided, how the balance will fall over time, or how your debts net against everything you own.
The Debt / Loans template in HQ Wealth is built for this. It tracks mortgages, student loans, and consumer credit with per-loan amortisation and payoff strategies, seeding a chart of accounts where each loan is its own liability account.
Amortisation: every payment splits into interest and principal
The most important and least understood fact about a loan is that a fixed monthly payment is not a fixed reduction of the debt. Each payment is split into two parts:
- Interest — the cost of borrowing, charged on the balance still outstanding. This part leaves and never comes back; it is an expense.
- Principal — the part that actually repays the loan. Only this part shrinks the balance.
Because interest is charged on the outstanding balance, the split shifts over the life of the loan. Early on, the balance is large, so most of each payment is interest and only a little is principal. As the balance falls, the interest portion shrinks and more of the same payment goes to principal. This is amortisation, and it explains the experience every mortgage holder has of paying for two years and watching the balance barely move.
Booked as double-entry, a single payment touches three accounts:
Debit Mortgage Loan (liability) $400 Debit Interest Expense (expense) $600 Credit Bank Account (asset) $1,000
The thousand left the bank account, but only four hundred of it reduced the debt; six hundred was the cost of borrowing for the month. A tracker that shows only the falling balance hides this split entirely, which is why borrowers are so often surprised by how little of their payment is actually building equity. Per-loan amortisation makes the division explicit on every payment, so the interest cost is visible rather than absorbed.
Why debt belongs on the same balance sheet as assets
Net worth is assets minus liabilities. That subtraction is the whole point — and it is impossible to perform if the assets live in one place and the debts live in another.
This is the structural reason a debt tracker bolted on beside an asset tracker is not enough. A house worth six hundred thousand is not six hundred thousand of net worth if there is a four-hundred-thousand mortgage against it; it is two hundred thousand, and the only way to see that is to have the asset and the liability on the same balance sheet. The same is true of a financed car, a student loan against future earnings, or a credit-card balance eating into liquid savings.
Double-entry handles this natively, because liabilities are a first-class account group sitting right beside assets and equity. When every loan is a liability account and every asset is an asset account on the same books, net worth is not a calculation someone has to remember to run — it is a property of the balance sheet, true at every moment. HQ Wealth's one net-worth view spans all of a user's portfolios for exactly this reason: the mortgage and the property, the student loan and the savings, the card balance and the brokerage account, all net against each other in a single figure that is actually correct.
Comparing payoff strategies
Once every debt is on the books with its balance and its interest rate, the question becomes which to attack first. Two well-known strategies pull in different directions, and the template lets a borrower compare them rather than guess.
- Avalanche — pay extra against the highest-interest debt first, while paying the minimum on the rest. This minimises the total interest paid over time, because the most expensive debt is cleared fastest. It is the mathematically optimal route.
- Snowball — pay extra against the smallest balance first, regardless of rate. This is not the cheapest path, but it clears whole debts quickly, and the momentum of seeing accounts disappear keeps many borrowers on track when the avalanche's slower early progress would not.
The honest framing is that avalanche wins on arithmetic and snowball often wins on follow-through, and the right choice depends on the borrower as much as the numbers. What makes the comparison possible at all is having every loan recorded with its real balance and rate. The amortisation schedule for each strategy can then be projected forward — total interest, time to debt-free, the order accounts clear — so the decision is made on the actual figures rather than a hunch.
From balance to plan
The Debt / Loans template turns a pile of separate loan balances into a structured liability picture: each loan amortised so the interest-versus-principal split is visible on every payment, every debt on the same balance sheet as the assets so net worth is genuinely true, and payoff strategies modelled side by side so the repayment plan is a choice rather than a default. None of this is tax advice, and where interest is deductible or treated specially that depends on the jurisdiction and is a question for a professional — but the bookkeeping that makes any of those questions answerable starts with putting the debt on the books.
Takeaway: Each loan payment splits into interest you lose and principal that actually reduces the debt, and only a real liability account shows you the difference. Put every mortgage, student loan, and card balance on the same balance sheet as your assets, and net worth becomes true by construction — then avalanche versus snowball is a decision you can model instead of guess.