A fan of financial literacy is telling people with car loans how to make principal-only payments.
The advice comes from TikTok creator Angela (@anggrill), who has generated more than 175,000 views as of Wednesday for a video posted on July 16. In the video, she talks about her loan payment situation and how she's been able to whittle away at her total loan amount by paying down the principal.
She starts by referencing a previous viral video in which she explained how she's paying off a four-year car loan in under three years by making extra payments that only apply to her principal rather than to any interest.
"I go to Bank of America for my loan," she explains, walking viewers through the additional $500 she set aside to pay it down. "But then, Wells Fargo is where my checking is. And so [the money] usually gets taken out literally the next day. So, like, by tomorrow, the $500 will be taken out."
She also notes, "Make sure you tell the person, like the teller, that you're talking to that you want this to be applied towards principal only. Have your account number ready, and then you're good to go."
@anggrill YOUR SIGN TO PAY YOUR LOAN OFF QUICKER !!! And yes i know its a privilege to be able to do this but i work for a nonprofit and i budget every month to be able to do so #autoloan ♬ original sound - Angela
In a 2023 article, Bankrate observed, "When you make extra payments on the principal, you save on your interest over time. With a simple interest loan — which make up the vast majority of car loans — interest is a percentage of the principal you owe. As you pay down the principal amount, your accrued interest becomes less and less. However, with precomputed interest loans, lenders front-load interest on your loan payments, so you benefit less from early payoff."
It's also possible to pay down a car loan faster even if the lender doesn't allow for principal-only payments. The same article advises, "You may not have the money to make a whole payment twice a month, but making a half payment every other week can cut down on the overall interest paid, depending on how it’s calculated. Remember, this only works out if it is a simple interest auto loan, as precomputed interest will be applied the same regardless of when payments are made."
"My car loan is through Bank of America and i don’t see an option on the app for principal only," one shared, "so i called them and they said there’s no way to do a principal only payment! how are you doing it?!"
Angela replied, "I go in person!!! Or you can call them and tell them to apply your extra payment towards principal only but I prefer a paper trail!!!"
"Learned this with my first car. Paid it off in One year! I plan on doing this with my new car," another viewer said.
The Daily Dot reached out to Angela via TikTok direct message and email and to Bank of America and Wells Fargo via email.
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The post ‘I finance through Wells Fargo and they have this option online!’: Driver says you should make principal-only payments on your car loan appeared first on The Daily Dot.
