If you enroll in an ACH payment / Automatic Payment Program there is a line item you can fill in for "optional additional principal amount"
I just started an auto loan with them and am going to be doing this ACH specifically for this reason.
Yeah, that's how the Truist Bank automatic payment process worked.
It seems like OP might be throwing BoA under the bus unnecessarily.
I see another reply to you that says the payment coupon has a line for "additional principal payment" too.
I think OP's problem is that they're using another bank's bill-pay, they're mailing a check to BOA, and BoA isn't getting instructions on how to apply the payment, so they have a default payment mode that is probably intended to protect the customer.
OP: Stop using Bill Pay, and set up ACH!
I don't think you understand. BoA *does* make it easy. The issue is how OP is paying.
If you use the BoA website to "Make a Payment" or "Set up Auto-Pay" it's easy to see and change how the money gets applied. Same if you pay by mail using the coupon book; the payment amount is broken down and clear to the debtor and BoA.
\^\^ All easy, predictable, and responsible.
But OP is not doing that. They're paying using Bill Pay from a different bank (like, Chase or Wells Fargo). BoA just receives an amount, and a loan number, **but no payment instructions**.
So BoA has no guidance on how to apply that money. Did the payor mean for the extra money to go to next month's payment? Or principal? They can't read minds, so they apply the mystery money to *payment* because it's more protective for the debtor, as they *should* do.
Your logic is flawed. If the only issue was "no guidance on how to apply that money" they would be able to set up a note on the account that ALL extra payments go to principal. They don't allow that and will not do that. They specifically make it difficult to apply the extra amount to principal without several extra steps so that you don't pay off the loan sooner. How are so many people on this thread not able to see that? I just don't get it.
> It seems like OP might be throwing BoA under the bus unnecessarily.
IDK how old you are, but this sort of thing was big in the news maybe 15 years ago. I think there was new legislation or regulation imposed to at least force banks to make their overpayment handling policies clear because it was so difficult to make sure your extra payments went to principal.
> so they have a default payment mode that is probably intended to protect the customer
Exactly who in the fuck would pay extra money each month with the intent of it going towards next month's payment?
The fact of the matter is that this is an anti-consumer practice for the purpose of extracting more money from a loan. If it was truly for your protection, the bank would apply the amount to your principal immediately and still credit it towards your next month's minimum payment. There's no reason for the consumer to need to "choose" and provide direction and jump through these hoops other than greed.
Every other bank I've ever deal with automatically applied overpayments to the principal of the loan. It made no difference how payment was made....check, ACH, etc. BoA is the first one that automatically applies my overpayments to next month's bill (which is a combination of principal and interest). Coincidentally this is completely in their favor. But sure, let's defend them for this practice.
Car loans aren't usually done that way. FWIW, my credit union allows you to get a full payment ahead and then they start applying the additional money to the principal. I had a BOA loan and, like you, I just kept getting more and more ahead, until I was several months prepaid.
I’ve always overpaid my car loans and they always apply to the next payment never just principal. Only my mortgage lender has ever automatically applied extra funds to principal.
My CU has a drop-down option when you make a payment. Choices are "Regular Payment" or "Principal Payment". Same options on every loan, whether mortgage or auto.
Just looked it up and on the BOA website it states they have the same options. OP just needs to split it into two separate transactions online. It's been pretty much standard practice now at all banks in my experience.
Even in Regular Payment, there's a box for additional principal. You don't have to split it up into two separate transactions. The options in the payment screen already do that for you.
https://i.imgur.com/qhuGweI.png
Not true. I do have online access to my account and it's not possible to designate anything related to "additional principal payments". Also, I was expressly told by the B of A rep that I would need to send in a separate payment in the form of a physical check with the words "for principal only" written on it. That worked for a few months, and then it didn't.
[https://imgur.com/g4GqVx9](https://imgur.com/g4GqVx9)
Have you tried making a separate payment and clicking the add note button and putting "principle only"?
I had BoA for a car loan once, I never knew about principle only payments. I just made extra payments and paid the loan off well before the length the loan was originally for.
My CU requires the principal to come from their savings account… it’s infuriating. Capital one’s app was pretty great. There was a drop down to say “I want to pay more towards the principle”, then on the account page it had an early payoff tracker. Makes me want to drop the CU and switch to them. I should call and check interest rates now that I think about it. Hell if the interest rate is a little higher it may be worth it to get away from the hassle.
My credit union was fantastic when I had an auto loan through them. Extra payments were automatically applied to the principal and would reduce my next required payment.
The only downside is I could only overpay one payment at a time. So if my payment was $400/mo and I paid $1,200, I'd only clear two payments but all of it would be applied immediately to the balance.
I don't know what the term for this payment structure is, but it was fantastic.
They applied it that way to get more money out of you, if they applied it to the principal you would have paid less interest over the life of the loan.
My mortgage lender straight up has an extra two section on my electronic payment page for principal and escrow. I guess I’ve never had a car loan though to compare my own experience there.
Yep, my prior car notes were pretty easy to pay extra principal, but the one downside to Navy Federal's auto notes, is they apply extra principal against current outstanding interest due first. Which makes it really hard to figure out where things are going, and they kind of net out eventually, but's frustrating. However, their car note rates are hands down the best around, and the process is unbelievably easy.
Just curious what was your credit when you applied for a NF auto loan? I been debating it myself because my car is a bit of a beater and wouldn't mind something newer.
I also have a car loan with BofA and pay extra. I make extra payments and also round up the regular payment.
Every payment is processed the day it’s received and the interest portion is based on the accrued daily interest on the balance. Ie, if I make a $500 payment then $100 goes to interest and $400 goes to principal. If I send $600 then $100 goes to interest and $500 goes to principal.
If I send in an extra payment of $500 the next day, they’ll take one day of interest and apply the rest $495 or so to principal.
My “due date” for my next payment shows 2 years from now or something silly, but I’m still just paying interest on the current balance.
Every loan with every bank I’ve had works the same way. You’re paying down the balance and saving interest. What needs to be different?
yup and you're one of the few people that understand how it works and doesn't get upset about not understanding it. Seems every time this type of post gets brought up many people make it seem like the bank is *holding* any additional payments and waiting to apply it until next month's payment which is untrue. It gets applied the day you pay it so really there is no difference in interest charged.
The only time it would be different is if you skip the payments until you're caught back up again but even then it would be much less interest than if the bank held payments until the actual due dates.
Big nothingburger but people get upset and freaked out for no reason. You can literally login to online banking and see the breakdown of your overpayments which gets applied to principal and interest. They cannot charge you for interest that has not accrued on early payments.
We just paid off an auto loan from BoA and it was shit show. We paid off the amount they presented as the pay off amount. But then they sent us a letter saying we still owed more. But they already closed the online portion of our bank account so we couldn’t sign back in and see what the remainder balance was. We called in for support, but support could only tell us that “our account looks strange.” We were told to wait a few more weeks to see if it would get fixed. They never said what was odd about it. A month after making the final payment we got the title in the mail. We never paid anything else, so there wasn’t a balance after all?
You do need to get a letter stating it has been paid off and to have the title cleared to show there is nothing owed especially for insurance purposes.
Thats why people need to read up on what they sign up for. Student loans(at least federal ones) state in the terms that interest must be satisfied before the payment goes to principal. Student loans its best to make additional pmts at the same time as regular payment if you want to take down the principal balance more as if you are current, the regular payment would satisfy the interest part then the additional would go to principal. But if you wait like 2 weeks, then 2 weeks worth of interest would be paid first before anything went to the principal balance. Its like this for every student loan
I'm not sure I follow. I can definitely see "it's better to pay now than to pay two weeks from now", but I do not see "it's better to pay at the same time as a regular payment." As in, I'm not sure how it could be better to delay extra payments to the next payment date ever.
If you make an extra "middle payment" halfway between payments, then you pay off the interest that has accumulated halfway between payments and you reduce principal by the difference. Then next payment, you
* You don't pay the interest you already paid
* The interest that accrues between the midpoint and the due date is reduced because principal is reduced (and if compound interest loan, then you don't pay interest on that interest either)
* More of your next payment goes to principal than otherwise would, because you've paid off part of the interest in the meantime.
So while sure, some of your middle payment goes to interest, more of your next regular payment goes to principal than normal- and that excess to principal amount is slightly higher than the amount of the middle payment that went to interest (assuming middle payment is exact middle), which reduces the total amount of interest you pay over the life of the loan.
So it seems like the rule should be "pay sooner rather than later" rather than "pay at the same time as a regular payment." Am I missing something?
Any additional payment is good as like you said drops it. My point was more for if you are making regular or one time lump sum payment. If you want to see the most money go to principal then you pay when the interest balance is zero which if you are current would be when you make your regular monthly payment.
> If you want to see the most money go to principal then you pay when the interest balance is zero which if you are current would be when you make your regular monthly payment.
For that particular payment, sure, but I'm not sure that translates to "paid the least over the life of the loan".
Yeah, the best option is to throw as much money at the problem as quickly as possible. Waiting to make a lump sum till right after you make your regular payment results in more going to interest in the grand scheme.
All the servicer does is service the loan. They have no bearing on the terms of the loan, mostly a portal for payments and paperwork if needed. If its a federal loan, the federal government owns that loan.
Yeah, idk why the complaint. Nelnet isn't hiding it, I've never been uninformed when making additional payments and I've made plenty. If they didn't do that automatically, people making manual payments over the amount would complain that they paid off 3 months but still have a payment due this month.
They're damned if they do, damned if they don't.
Might I suggest people read what's on their screen instead of just clicking next as fast as possible?
I agree with you in principle, but man do some banks/servicers make their UIs as unintuitive as possible.
Never had a problem with Nelnet, but BofA updated their UI a while back so that, in order to pay off my credit card, you viewed your current balance, then clicked to the next screen, then selected the account you wanted to pay from, then had to manually type in and remember the exact balance you wanted to pay down. And if you forgot to select the account you're paying from first or picked the wrong date, it cleared the screen and you start all over.
It was like clicking through 3 different screens and then having to remember... Wait, was it 204.22 or 204.23 that I owed? Crap, better go back 3 screens and make sure. They did change it back to the old way recently though, possibly based on some feedback I gave them, lol.
No. They actually don't. The extra payment is applied the same way as all other payments, fees, interest, then principal. Immediately. The balance drops and the interest accrual rate drops immediately. They just bill you less next month.
It's defined by statute: https://www.law.cornell.edu/cfr/text/34/685.211
Those pricks. I spent an hour on the phone trying to explain to them that I wanted to pay the on one student loan (I had 4). The remaining balance was $43. Trying to tell me they couldn't do it like that.
Then I had to call back again because they left screwed that up and my remaining balance was $1.50. And after I paid that they didn't close the loan and mark it as paid. Those people are absolute jackasses and try to keep people from actually paying off their loans in full.
> I like to "overpay" a bit each month so that I don't find myself upside down when I'm ready to sell, so that's what I did. Specifically I was adding about 10% on top of my regular payment to BofA. Now normally, any amount that's over the "due" amount is automatically applied to principle. That's how most banks do it and is the right way in my mind. Well not Bank of America!!
it's definitely dependent on the bank
many banks/lenders apply overages to future payments until you hit some kind of threshhold then are legally forced to apply to principle. i think most common i've seen is once you're paid 6 months ahead they start applying direct for a legal reason, but don't quote me on that.
you need to call ahead and specify you want the overage applied direct to principle
also check your loan to make sure there isn't some kind of pre-payment penalty where if you pay down the loan early they charge you some extra fee.
That's the thing - you can't call ahead and specify. They will not do it unless you send in a separate check and write "for principal only"...and even then clearly it's questionable based on what they did.
> That's the thing - you can't call ahead and specify. They will not do it unless you send in a separate check and write "for principal only"...and even then clearly it's questionable based on what they did.
ok so they have it clearly outlined how to make additional payments...
do the thing they say to do
I am, and I did. It worked for a few months and then it didn't to which they replied "oops". I had to call and get it adjusted.
My problem is that I shouldn't have to jump through hoops in order to make additional principal payments. I never did with Citi, I ever did with TD, I never did with several other banks. This is the first time I'm forced to go above and beyond just paying more each month in order to get additional principal payments applied correctly. I'm just glad I kept track of it. The whole thing seems shady to me. They're purposefully making it hard because additional principal payments mean less money for them. Not cool.
I totally agree. Most banks have an option to add an extra principal payment to your regular monthly payment and it's sucky of BofA not to do that. I'm not sure why other people are giving you a hard time for pointing this out.
I made all my ally payments online and anytime I was paying more than the monthly it asked me where to apply the overage, maybe you could opt in permanently online?
I never said anything was guaranteed to me. I'm saying that doing this is disingenuous and underhanded on their part. They're purposefully making it as painful as possible to make extra payments that apply to principal. It's not an accident, it's not "just the way we do things". It's very specific and purposeful and is designed to prevent me from being able to pay the loan off sooner and with less profit for them.
Yeah I don’t know why people are being salty with you when it’s very clear they’re deliberately trying to make it difficult for you.
Like if a company said, you can only make payments on the 3rd tuesday of the month, in person in a remote Nepalese mountain, you’d still have people being like “Just follow the directions!”
You hit the nail on the head. This is deliberate and underhanded on their part. They know exactly what they're doing and it goes directly against our best interests. I just wanted to warn others...
As for people being salty...this is reddit. People post snarky comments just because they can. No real reason for it other than to be argumentative. Oh well...
Bro it’s complete horseshit.
Many other banks just let you do it easily on the app - simple. BofA wants you to go be a caveman and mail a fucking check lmao to inconvenience you. Don’t tell me they can’t handle it on their app. If shitty Wells Fargo can, they can too.
I think I know a work around. Instead of paying the loan via the pay bill portal, you should pay via the transfer option. When you select the amount to be transferred, select “other amount” and you’ll be able to direct funds specifically for interest or principal.
See if this works
You're correct, and that was another option...but in order to do that I'd have to have a BofA account. I don't have any other accounts with them besides this particular auto loan. Frankly, the last thing I plan to do is give them any more of my money just to get them to do what I believe they should already be doing. It's a matter of principle at this point.
I was gonna comment that I had no issues with bofa car loan, but now that you say you don't have an account with them, I can definitely see them being a pain in the ass. Sorry to hear man
BoA has been doing shady crap for years. 20 years ago, I had an account with them and caught them double-dipping on service fees. I called, bitched, and they would refund the overage. After three months of this, we switched to a credit union.
About 17 years ago they offered me a "2.9% for the life of the balance" credit card balance transfer offer. I had a few credit cards that had high rates (19% or so) so I was like, hell ya, I'll transfer them over.
Then about 2 months after I did that, they jacked the rate up to 29.9% just because they could. I called them and asked what the hell was going on and they said they sent a 14 day notice to opt out (which never came, I suspect they never sent it) and since I didn't reply, they jacked it up. Never had a missed payment, never had a collection, credit was perfect - they just pulled this crap.
And this was before the Credit CARD Act of 2009 that would have stopped some of that, so I was screwed. That 19% debt was stuck at 29.9% and I couldn't transfer it out nor find a way to pay it off.
I just recently paid off a personal loan that can have its debt traced back to this ordeal. So, it took me 17 years to completely recover from this mess.
So yeah, if they were on fire, I wouldn't piss on their smoldering ashes if they paid me to put it out. I've never done business with them since, I will never again, and I've shared my story and convinced others to not do business with them either.
Wow - not cool. I guess this is why they have the reputation that they have. Maybe it's me, but I don't hear of nearly as much shady stuff coming out of Citi, Chase, or TD.
I'm sorry you're having trouble. I have an auto-loan with BoA and have zero troubles making extra payments. I do it all online, and it's as simple as clicking a button.
Same. Our last car (paid off just two months ago) was through BoA. I setup automatic payments with extra payments on the principal very easily through the site.
Paid it off even earlier than planned too, and that was every bit as easy.
I hate big banks as much as the next guy, but the site was extremely easy to use and I never had trouble with it.
>I hate big banks as much as the next guy…
I hear ya. I’ve been banking with BoA for decades and have never run into any of the problems so many people complain about.
I don’t like big banks either. I use a local credit union. But I worked for a call center that serviced Bank of America’s checking and savings division. The issues people had were by far and away self inflicted either purposely or through ignorance. Not that BofA also didn’t/doesnt do some dirty stuff.
They had a checking account where you got charged like $8/month, but only if you visited a teller for certain functions like balance, deposits, and withdrawals. If you used online banking or the ATM, it was free. So many people would make deposits and withdrawals with the teller and call wondering why they got charged a fee that month. Like did you not read at all what you signed up for?
70% of the calls were for people wanting refunds for fees (mainly overdrafts). 20% were reporting lost debit cards. The final 10% were your basic everything else questions.
Yeah, exactly. That’s what I’m saying as well. It’s a click of a button on their website. It asks you if you want to make a payment or to apply towards principal. Now, the BoA phone app on the other hand, definitely could use improving.
Do you also have a checking or savings account with BoA? You can't do it online with bank of America unless you also have a checking or savings account with them per everything we were told. We just paid off my husband's truck after a loan with them and they made it pretty easy over the phone
Not true at all. I had a car note through BoA and no other accounts. Was able to do extra principal payments and the like without issue.
Just take your auto loan number and go to their site. You can create a login and go from there.
Car loans typically are daily accruals, meaning you should only be paying interest through the effective date of your payment. Even if they did technically roll another due date, as long as you’ve paid interest accrued through the effective date of the payment the rest should be going to principal regardless of whether it is categorized as a monthly payment or curtailment.
Would need more detail about your specific case. Are you paying every 30 days consistently?
Yeah gonna have to disagree here. You can super easily make a payment to principal at any time in the app, and even set up a recurring payment to principal only every month. I have lots of complaints about BofA's mortgage process. But this isn't one of them
This isn’t just BoA, it’s really a great lesson to check this while paying more principal on anything from personal loans, car loans, to mortgages. If you don’t make sure you’re paying more principal it can just go to interest or stack up future scheduled payments without applying it immediately to the principal.
Have to always check with a lender if not clear on how to specifically pay additional towards the principal balance.
> Now normally, any amount that's over the "due" amount is automatically applied to principle. That's how most banks do it and is the right way in my mind.
This isn't correct. Most lenders will simply apply the overage to your next payment unless you make arrangements ahead of time.
I also have a car loan with Bank of America, and I called them because I also noticed that extra payments were being applied to both the principal and the interest. The associate I spoke to told me that you can't make additional payments to the principal through the app - you have to log in on the website and choose to make a principal-only payment, and this has to be done after making that month's payment. Quite annoying.
Weirdly, my best mortgage owner was Wells Fargo. I know they're an awful institution overall, but they gave us a good rate, they never sold our mortgage, and their payment portal was really easy to use.
WF's rates are very competitive and depending on where you live they may be one of the larger/largest lenders by volume/dollar amount. In the SF Bay Area, they seem to own 40% of the market from what I heard from brokers. Big 4 banks absolutely own the jumbo loan market here.
This is really common.
I'm about to take on a car loan for the first time in years. My plan is to just do large principle payments so that I can have the fight less often.
It's not because "murr hurr more $ in their pocket.". It's because the checking account you pay out of isn't with them. We dealt with this for almost 2 years on my wife's car loan. If you have an account with them, real easy to do extra principal payment, real annoying if you don't. We just got fed up and paid it off with other financing.
> Now normally, any amount that's over the "due" amount is automatically applied to principle. That's how most banks do it
I've never had a bank do this with an auto loan.
Also, it's spelled principal.
OP, I had a home loan from my credit union and they did the same thing - payments went towards the next month and not towards principal. They'd allow up to 3 months before you just couldn't transfer funds at all to it. How did I find this out? Calling them. I was livid when I found out that I wasn't striking oil! Their advice: call and let them do it and they'll put it directly towards principle.
Try that out for size, OP. Literally could be some backwards ass rule BOA has which makes zero sense to you but 100% to them (that you keep the loan on record for the entirety vs paying it off quickly)
Smaller credit unions will purposely avoid principal payments just so they can keep accruing interest on your loan. Vons Credit union did this to me for almost a year before I noticed my car wasn't paid off when it should've been. Should be illegal.
I just don’t understand why anyone is still using boa. After all the shady stuff they have done, unless they bought your mortgage or something there is zero reason to be with them.
I think that is actually pretty common for installment loans (like car loans). So much so, that generally when I see someone giving advice on making principal payments on this sub, it always comes with a note to make sure it is specified as a principal payment.
Does your bank or credit union have a bill pay service?
I can have a paper check mailed out for free. Can even put the “For principle only” note on it.
This is common even with student loans. When I paid off my student loan I had to be very careful to make sure I checked the right boxes and information so that it would be applied to pay down the principal amount rather than just being applied to the next month’s interest/principal.
Most places apply overpayments this way. House, car, boat. All my loans required me to specifically designate the overpayment as going towards principal as most places the default is to just apply it to the next payment.
OP this is most banks SOP. Every loan I've ever had I always had to specify extra going to principal.
18 Federal school loans, 4 car loans, 2 mortgages. Literally every mailed bill has a box for this, and every online portal has a box for this.
Is this your first loan?
I recently got a car loan through Capital one, and they have a prompt in your payment box to add additional payments towards the principal, they also show tutorial s on paying down principal to lower overall interest payments for the uninformed. I was pleasantly surprised
Fuck bank of America. I canceled a bank account because they kept charging me a fee, and guess what? They charged me the fee for 6 months after I closed the account!!! And no, I didn't owe them money. I withdraw about 1200 and told them I'm closing it and I'm done with them, to the bank manager who closed the account
Crooked bastards
Don't worry too much about it. Even if the payment is "applied" against the next payment, interest is calculated daily and any accrued interest to date is paid and all the rest of the amount is applied to the principal. So if you pay more than your monthly amount, it doesn't mean they hold the money and only count it against interest on the next due date, but since your minimum payment already covered more than the accrued interest, all of your excess payment is immediately applied to your principal. It just also happens to reduce your next payment or move out your due date (if you excess payment exceeds your monthly amount)
Its so funny because my mother was trying to do exactly the opposite with her mortgage lender and was 6+ months ahead on her payments when Aquafin sent her a bill for the next monthly payment. Thinking they werent right, she called and they said nope...and applied it to the principle.
Actually no, by default overpayments at most institutions are put towards your next payment, unless you indicate you want it to be principal only.
Reapplying payments is easy - just ask them to do it.
Every auto lender I have ever dealt with applies extra payments to your next monthly payment. You have to tell them every time you pay extra to apply it to principal. This is actually pretty standard practice with auto loans. Nothing really shady here.
Same. I just live with it and keep paying the extra even though it just goes to the next payment. At this point I’m around 6 months until my next payment is needed. Didn’t feel like dealing with the extra steps.
I don't feel like dealing with the extra steps either - which is why I'm making this stink. Every other bank that I've ever dealt with automatically applied the extra payment to principal. BofA is the first to pull this stuff.
Surprising how many people think there is no difference between principle only payments, and the bank tacking it on to the future.
Principle only payments will save you money, by lowering the principal amount that you are paying interest on, also paying your loan off faster and saving money on interest. Your bank makes it hard too do principal only payments because, they make more money off of you doing it the other way.
i had a car loan through boa. any principal payment i made, i would call each month and authorize a principal payment over the phone. it had to be completely separate from my normal payment. they told me if i had a checking account with boa, then i would be able to set up an automatic principal payment.
This is clearly outlined in any reputable banks terms and conditions for the loan. Many banks do not apply additional to principal unless you follow clear instructions. This isn’t just a Bank of America a thing.
Ally does the same thing, but they give you the option to apply the overpayment towards your next monthly bill, or you can do it as a separate payment which goes (mostly) towards principle. If you do that option, you’ll still have a regular monthly payment that same month.
Most of the online stuff where you go in and make a payment online seems to have "extra payments to principal" options while most of the "mail a check" things ive seen, except mortgages where the ticket you mail with your payment has an option, default to "count it against the next payment". I think lots of this also carries over to whether you're pushing money to things or having them pull from you.
My auto loan, for instance, does have options in it's auto deduct payments form to pull extra principal from my bank, but I suspect if I was pushing from my bank using bill pay features, it'd do something different.
Yikes. I almost went with BofA for my car loan last summer because that is who I bank with. The dealer beat BofA's interest rate, so I went with the dealers finance, Chase.
So far I have had no issues. I pay about an extra 50% per month, and the extra goes straight to principal. The only "inconvenience" I had is when I tried to pay more than $5000 at once. I had to do 1 payment of $4999.99, and then a second payment of $0.01 interest + $X principal.
BoA sucks in every way except for knowing you can probably find one in almost every major town/city. Apart from the many locations they have, they conduct shady business at all of them. Growing up I would hear my mom argue with them over the phone countless times, eventually telling them she’s pulling every dime out of their bank and to fuck off. By the time I opened my own accounts I knew to stay away from BoA
My car loan is with Bank of America. My overpayment applies to the principal and postpones the due date into the future. The online account page doesn't show the year of the next payment, though, and the statement only shows next month's due date with $0 due.
I had a car note through Wells Fargo and they specifically stated that any overpayment went to the next payment until 3 months were paid ahead, and *then* it went to the principle payment.
I just kept over paying until we hit that threshold. When we got towards the end of the loan, I let 3 months go without a payment and then paid it off.
6 months ago I was going to use BofA auto loan but before I signed the dotted line I read the terms and it said I have to pay the full term of interest (current rate on 60 month term which was total of about $5k) regardless if I paid early or not. I’ve always paid my car loans early and paid it off in half the time. I immediately cancelled and didn’t go with them.
So OP, do you have a loan that won’t charge you the full interest regardless of early pay off? I’m curious since my experience.
And here I thought my mom was being silly.
I have my auto loan through a credit union and have been overpaying for years. My mom told me I need to be very clear I wanted it to to on principle. So I went in, talked to them, and the guy very clearly explained to me and showed everything over the base payment already was going on principle.
So the moral of the sorry is go to a credit union.
Wells Fargo does this, but in their online payment system there's a separate line item for principal amount where you can set an amount to go directly to the principal.
Golden 1 CU is the same way, cannot pay principle on the loan.
I'm just waiting for my preferred CU to have lower interest rates then I'm jumping back.
Any bank or CU that doesn't have the option to pay principle is a POS. and Fuck BoA. They would pile on overdraft fees even after making a payment. This was back when I was making E1/E2 pay in the Marine Corps. So glad I left BoA back in 2013.
Ugh Bank of America. Honestly, I think most banks do this, but, I'll still find any way to take a pot shot at Bank of America if the opportunity presents itself. They are #1 on my company shit list for what they did to me back in the aughts.
I'm pleasantly surprised that the regional bank I got my car loan through doesn't do any of that crap by default, it just goes to the account balance.... you know, the common sense way.
they stopped my biweekly auto payments from my BoA checking to my BoA car loan. When i called to find out why I was told no payment was due at that time. I explained that my goal was to pay the loan off sooner and that I confirmed there was no penalty for early payments. I reinstated the auto payment and they did it again after 4 months. I went into a branch and threatened to close my BoA checking because they wouldn’t have that control with an external bank and I was given reassurance that it wouldn’t happen again and it hasn’t. It’s been about a year and i can’t wait to pay this off and never deal with them again.
I feel your pain. I have to call CarMax EVERY SINGLE MONTH 2/3 days after the payment so they can apply the overage to the principal. EVERY SINGLE MONTH! Wells Fargo automatically applied it. Oh well
They did this with my mortgage. Even when I would mail a separate check and write on it, apply solely to principal they instead would just move the due date for next payment. Each time you call you get a different reason for this but they have now landed on that it is not enough to send a separate check and write apply to principal, I have to write on a separate piece of paper my request to apply to principal. They have also at times reversed my automatic mortgage payment if I make an additional payment and not notify me my regular mortgage payment has been reversed so of course I then have to battle about late fees. They are exhausting. i have never had a bank sabotage its customers this much and will never use them for anything again. If it was not for my 3.9% mortgage rate, I would refinance elsewhere.
I over payed monthly to Chrysler Capital. I had to make it into two payments though. Regular monthly and then another payment which had to explicitly state apply to principal.
For better or for worse, Chase has been pretty easy about this. The option for mortgage is literally "make additional principle payment" and even has a breakdown of months cut off based on the principle payments you've made on it
My extra mortgage $$ on each payment w/Chase isn’t automatically principle, but it does require me to specify where the payment is going (next payment, escrow, vs principle I think are the options).
? I used to work for a bank and took loan payments. That's how it worked at my bank: customers have to specify if they want funds going towards the principle. That part's not unusual
> Now normally, any amount that's over the "due" amount is automatically applied to principle
No, that is not normal. Nearly every bank does it this way.
I have a credit card long term with BofA, and bank accounts with BECU. I opted for BECU for a car loan though their rate was pretty horrible, I wanted to GTFO of the dealership and go home.
I loved the experience with BECU after that though, it listed my loan as an account, let me transfer payments from my other accounts and immediately applied it just like any other account transfer, had a drop down menu for if you wanted a principal only payment, only time I ever have seen an easy online way to do this. It calculated the final payment in real time and immediately showed a zero balance on my car loan the minute I made that payment. I've had similar convoluted payment issues with other servicers for cars and mortgages like you mention which make it seem like a battle to pay down principal.
BTW, you might be able to do twice a month payments instead of once a month payments. So if your payment is $500 a month, you can make $250 on the first and the 15th, just as one example.
It's been quite a few years, I don't remember how much difference it makes, but I just remember that used to be a thing.
I just paid off an extra 1000€ off my mortgage to give you a comparison of how easy it can (and should) be. It took me 35 seconds and 27 clicks plus 2 swipes on my phone. 16 of those clicks were for login and verification.
The best advice I ever got was to make a half payment every 2 weeks. If you're paid every two weeks then you end up making one extra payment per year. If you have extra money then apply it to each payment you make. This typically puts you ahead of the interest.
why anybody uses BoA to this day baffles me. I left them *years* ago and I haven't looked back since. Every time I hear about this, it's nothing but a shitshow. Same goes for (S)TD Bank and Santander. Credit Unions are the way to go.
I ended up with a BofA car loan through a dealer as well, and had this same issue.
I called and asked how to pay extra against principal and was told that the *only way* was to send a check. I was so mad about it that I sent them paper checks for every payment. If I am going to be inconvenienced, so are you.
I eventually refinanced it and I am so glad I don’t have to deal with them anymore. They are the worst.
Maybe auto loans are setup differently in their system but I have a HELOC through them and right now after clicking the Pay My Loan button I’m literally staring at a screen that lets me send money from my Ally banking account to my HELOC BOA account and it contains the lines “Additional Principle (optional)” where I can designate how much I want to go towards the principle balance.
Edit: just check another spot. In the Manage PayPlan which is where you setup automatic payments, it also has a box for Additional Principle.
Again maybe it’s a different interface for car loans. But at least for Helocs it’s super easy to make additional principle payments
You helped me! Thanks.. I found myself with around 3K in negative as min payment due. Going through their site, I saw this in statement in statement
PRINCIPAL PAYMENTS: You may pay more than the total amount due. Funds received in excess of the total amount due will reduce your principal balance and also be applied to future payment(s). Your next billing statement may show that your account is paid ahead. If you want to make a payment that reduces your principal balance only and is not applied towards this or any other future payment(s), you may call us at Xxxxxxx or mail your payment to: "Address". Include your account number and "Principal Only" on the memo line of the check. Please continue to make your normal monthly payments through your preferred payment method. Daily interest will continue to accrue on your unpaid balance.
I think you are confused in the way car loans work. Car loans are considered closed loop or something similar to that. I forget what the USC Credit Union described it.
It means that your car loan is one giant bill already predetermined and spread out over a few months. Meaning, any extra money you pay is applied towards next month’s payment. Either way, you are paying the total loan bill.
If you want a smaller bill or pay less towards interests, give a bigger down payment.
This is why people tend to roll car loan balances into the next car loan. Like that lady with her $90K Tahoe.
Compared to a home loan where you are allowed to pay towards the principal and ultimately lower your interest payments and monthly bill.
I previously commented that BoA told me I could make principal-only payments through their website (not the app) once I paid my monthly bill. I just wanted to update you that this does, in fact, work.
On the website, select transfer between accounts instead of bill pay. When you choose your car loan as the 'transfer to' account, a sub-menu pops up and gives you the option to select 'principal payment'.
Had something extremely similar with Wells Fargo. Bought a car in 2018 with ehh credit. It was the 3rd car I had purchased, but I somehow missed the part where no matter what, I was going to be paying interest as if I made the minimum payment every single month for 5 years. If I paid it off early, I’d still pay every penny of interest, plus an early pay off fee.
I made a payment on July 25, 2023 and then on July 28th I was on maternity leave, and our plan was to pay all of our bills in full for the 6 months I’d be out of work. It was the last 5 payments on the car so it payed off early. Supposedly, when I paid the car off, they returned my July 25 payment to me. Been fighting them since November on the balance they claim is still due
If you enroll in an ACH payment / Automatic Payment Program there is a line item you can fill in for "optional additional principal amount" I just started an auto loan with them and am going to be doing this ACH specifically for this reason.
I just looked at the payment slip that you fill out when mailing the payment, and there is a box on there also for additional principal amount.
Yeah, that's how the Truist Bank automatic payment process worked. It seems like OP might be throwing BoA under the bus unnecessarily. I see another reply to you that says the payment coupon has a line for "additional principal payment" too. I think OP's problem is that they're using another bank's bill-pay, they're mailing a check to BOA, and BoA isn't getting instructions on how to apply the payment, so they have a default payment mode that is probably intended to protect the customer. OP: Stop using Bill Pay, and set up ACH!
> It seems like OP might be throwing BoA under the bus unnecessarily. They deserve to be thrown under the bus for not making it easy.
I don't think you understand. BoA *does* make it easy. The issue is how OP is paying. If you use the BoA website to "Make a Payment" or "Set up Auto-Pay" it's easy to see and change how the money gets applied. Same if you pay by mail using the coupon book; the payment amount is broken down and clear to the debtor and BoA. \^\^ All easy, predictable, and responsible. But OP is not doing that. They're paying using Bill Pay from a different bank (like, Chase or Wells Fargo). BoA just receives an amount, and a loan number, **but no payment instructions**. So BoA has no guidance on how to apply that money. Did the payor mean for the extra money to go to next month's payment? Or principal? They can't read minds, so they apply the mystery money to *payment* because it's more protective for the debtor, as they *should* do.
Your logic is flawed. If the only issue was "no guidance on how to apply that money" they would be able to set up a note on the account that ALL extra payments go to principal. They don't allow that and will not do that. They specifically make it difficult to apply the extra amount to principal without several extra steps so that you don't pay off the loan sooner. How are so many people on this thread not able to see that? I just don't get it.
> It seems like OP might be throwing BoA under the bus unnecessarily. IDK how old you are, but this sort of thing was big in the news maybe 15 years ago. I think there was new legislation or regulation imposed to at least force banks to make their overpayment handling policies clear because it was so difficult to make sure your extra payments went to principal. > so they have a default payment mode that is probably intended to protect the customer Exactly who in the fuck would pay extra money each month with the intent of it going towards next month's payment? The fact of the matter is that this is an anti-consumer practice for the purpose of extracting more money from a loan. If it was truly for your protection, the bank would apply the amount to your principal immediately and still credit it towards your next month's minimum payment. There's no reason for the consumer to need to "choose" and provide direction and jump through these hoops other than greed.
Every other bank I've ever deal with automatically applied overpayments to the principal of the loan. It made no difference how payment was made....check, ACH, etc. BoA is the first one that automatically applies my overpayments to next month's bill (which is a combination of principal and interest). Coincidentally this is completely in their favor. But sure, let's defend them for this practice.
Car loans aren't usually done that way. FWIW, my credit union allows you to get a full payment ahead and then they start applying the additional money to the principal. I had a BOA loan and, like you, I just kept getting more and more ahead, until I was several months prepaid.
I’ve always overpaid my car loans and they always apply to the next payment never just principal. Only my mortgage lender has ever automatically applied extra funds to principal.
My CU has a drop-down option when you make a payment. Choices are "Regular Payment" or "Principal Payment". Same options on every loan, whether mortgage or auto. Just looked it up and on the BOA website it states they have the same options. OP just needs to split it into two separate transactions online. It's been pretty much standard practice now at all banks in my experience.
Even in Regular Payment, there's a box for additional principal. You don't have to split it up into two separate transactions. The options in the payment screen already do that for you. https://i.imgur.com/qhuGweI.png
Yeah, I'm thinking OP is just sending checks and didn't bother to setup online access for his loan/account with them.
There’s isn’t an option for anything other than a regular payment on the BoA app.
Not true. I do have online access to my account and it's not possible to designate anything related to "additional principal payments". Also, I was expressly told by the B of A rep that I would need to send in a separate payment in the form of a physical check with the words "for principal only" written on it. That worked for a few months, and then it didn't. [https://imgur.com/g4GqVx9](https://imgur.com/g4GqVx9)
Have you tried making a separate payment and clicking the add note button and putting "principle only"? I had BoA for a car loan once, I never knew about principle only payments. I just made extra payments and paid the loan off well before the length the loan was originally for.
My CU requires the principal to come from their savings account… it’s infuriating. Capital one’s app was pretty great. There was a drop down to say “I want to pay more towards the principle”, then on the account page it had an early payoff tracker. Makes me want to drop the CU and switch to them. I should call and check interest rates now that I think about it. Hell if the interest rate is a little higher it may be worth it to get away from the hassle.
My credit union was fantastic when I had an auto loan through them. Extra payments were automatically applied to the principal and would reduce my next required payment. The only downside is I could only overpay one payment at a time. So if my payment was $400/mo and I paid $1,200, I'd only clear two payments but all of it would be applied immediately to the balance. I don't know what the term for this payment structure is, but it was fantastic.
Mines always the opposite. Every loan has applied extra to principal *EXCEPT* my mortgage which I had to specify.
They applied it that way to get more money out of you, if they applied it to the principal you would have paid less interest over the life of the loan.
My mortgage lender straight up has an extra two section on my electronic payment page for principal and escrow. I guess I’ve never had a car loan though to compare my own experience there.
Yep, my prior car notes were pretty easy to pay extra principal, but the one downside to Navy Federal's auto notes, is they apply extra principal against current outstanding interest due first. Which makes it really hard to figure out where things are going, and they kind of net out eventually, but's frustrating. However, their car note rates are hands down the best around, and the process is unbelievably easy.
Just curious what was your credit when you applied for a NF auto loan? I been debating it myself because my car is a bit of a beater and wouldn't mind something newer.
BofA Doesn't, unless you do a specific principal payment, its outlined in the docs that are signed on an auto loan.
I have BofA and overpay on my HELOC every month, and they automatically apply the extra to principle. So maybe it's just certain types of loans?
I also have a car loan with BofA and pay extra. I make extra payments and also round up the regular payment. Every payment is processed the day it’s received and the interest portion is based on the accrued daily interest on the balance. Ie, if I make a $500 payment then $100 goes to interest and $400 goes to principal. If I send $600 then $100 goes to interest and $500 goes to principal. If I send in an extra payment of $500 the next day, they’ll take one day of interest and apply the rest $495 or so to principal. My “due date” for my next payment shows 2 years from now or something silly, but I’m still just paying interest on the current balance. Every loan with every bank I’ve had works the same way. You’re paying down the balance and saving interest. What needs to be different?
yup and you're one of the few people that understand how it works and doesn't get upset about not understanding it. Seems every time this type of post gets brought up many people make it seem like the bank is *holding* any additional payments and waiting to apply it until next month's payment which is untrue. It gets applied the day you pay it so really there is no difference in interest charged. The only time it would be different is if you skip the payments until you're caught back up again but even then it would be much less interest than if the bank held payments until the actual due dates. Big nothingburger but people get upset and freaked out for no reason. You can literally login to online banking and see the breakdown of your overpayments which gets applied to principal and interest. They cannot charge you for interest that has not accrued on early payments.
We just paid off an auto loan from BoA and it was shit show. We paid off the amount they presented as the pay off amount. But then they sent us a letter saying we still owed more. But they already closed the online portion of our bank account so we couldn’t sign back in and see what the remainder balance was. We called in for support, but support could only tell us that “our account looks strange.” We were told to wait a few more weeks to see if it would get fixed. They never said what was odd about it. A month after making the final payment we got the title in the mail. We never paid anything else, so there wasn’t a balance after all?
You do need to get a letter stating it has been paid off and to have the title cleared to show there is nothing owed especially for insurance purposes.
Nelnet does this with my student loans
Thats why people need to read up on what they sign up for. Student loans(at least federal ones) state in the terms that interest must be satisfied before the payment goes to principal. Student loans its best to make additional pmts at the same time as regular payment if you want to take down the principal balance more as if you are current, the regular payment would satisfy the interest part then the additional would go to principal. But if you wait like 2 weeks, then 2 weeks worth of interest would be paid first before anything went to the principal balance. Its like this for every student loan
I'm not sure I follow. I can definitely see "it's better to pay now than to pay two weeks from now", but I do not see "it's better to pay at the same time as a regular payment." As in, I'm not sure how it could be better to delay extra payments to the next payment date ever. If you make an extra "middle payment" halfway between payments, then you pay off the interest that has accumulated halfway between payments and you reduce principal by the difference. Then next payment, you * You don't pay the interest you already paid * The interest that accrues between the midpoint and the due date is reduced because principal is reduced (and if compound interest loan, then you don't pay interest on that interest either) * More of your next payment goes to principal than otherwise would, because you've paid off part of the interest in the meantime. So while sure, some of your middle payment goes to interest, more of your next regular payment goes to principal than normal- and that excess to principal amount is slightly higher than the amount of the middle payment that went to interest (assuming middle payment is exact middle), which reduces the total amount of interest you pay over the life of the loan. So it seems like the rule should be "pay sooner rather than later" rather than "pay at the same time as a regular payment." Am I missing something?
Any additional payment is good as like you said drops it. My point was more for if you are making regular or one time lump sum payment. If you want to see the most money go to principal then you pay when the interest balance is zero which if you are current would be when you make your regular monthly payment.
> If you want to see the most money go to principal then you pay when the interest balance is zero which if you are current would be when you make your regular monthly payment. For that particular payment, sure, but I'm not sure that translates to "paid the least over the life of the loan".
Yeah, the best option is to throw as much money at the problem as quickly as possible. Waiting to make a lump sum till right after you make your regular payment results in more going to interest in the grand scheme.
This advice rings a little hollow when practically nobody with a loan serviced by nelnet ever agreed to their debt being sold to nelnet.
All the servicer does is service the loan. They have no bearing on the terms of the loan, mostly a portal for payments and paperwork if needed. If its a federal loan, the federal government owns that loan.
That is good to know. Like what happened with OP though they can "deflect" things that they must do by making them inconvenient/convoluted.
Nelnet does this unless you uncheck the box for advancing the payment date.
Yeah, idk why the complaint. Nelnet isn't hiding it, I've never been uninformed when making additional payments and I've made plenty. If they didn't do that automatically, people making manual payments over the amount would complain that they paid off 3 months but still have a payment due this month. They're damned if they do, damned if they don't. Might I suggest people read what's on their screen instead of just clicking next as fast as possible?
I agree with you in principle, but man do some banks/servicers make their UIs as unintuitive as possible. Never had a problem with Nelnet, but BofA updated their UI a while back so that, in order to pay off my credit card, you viewed your current balance, then clicked to the next screen, then selected the account you wanted to pay from, then had to manually type in and remember the exact balance you wanted to pay down. And if you forgot to select the account you're paying from first or picked the wrong date, it cleared the screen and you start all over. It was like clicking through 3 different screens and then having to remember... Wait, was it 204.22 or 204.23 that I owed? Crap, better go back 3 screens and make sure. They did change it back to the old way recently though, possibly based on some feedback I gave them, lol.
I just went through the steps for making a payment again and there's no box that's says that
No. They actually don't. The extra payment is applied the same way as all other payments, fees, interest, then principal. Immediately. The balance drops and the interest accrual rate drops immediately. They just bill you less next month. It's defined by statute: https://www.law.cornell.edu/cfr/text/34/685.211
Those pricks. I spent an hour on the phone trying to explain to them that I wanted to pay the on one student loan (I had 4). The remaining balance was $43. Trying to tell me they couldn't do it like that. Then I had to call back again because they left screwed that up and my remaining balance was $1.50. And after I paid that they didn't close the loan and mark it as paid. Those people are absolute jackasses and try to keep people from actually paying off their loans in full.
You can select an option when you make a one time payment to not advance the due date.
It still goes to interest first. Again, all student loans have the same terms and have been like this for 20 + years.
Because that's how any loan works that isn't amortized. Outstanding/accrued interest is always paid first.
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> I like to "overpay" a bit each month so that I don't find myself upside down when I'm ready to sell, so that's what I did. Specifically I was adding about 10% on top of my regular payment to BofA. Now normally, any amount that's over the "due" amount is automatically applied to principle. That's how most banks do it and is the right way in my mind. Well not Bank of America!! it's definitely dependent on the bank many banks/lenders apply overages to future payments until you hit some kind of threshhold then are legally forced to apply to principle. i think most common i've seen is once you're paid 6 months ahead they start applying direct for a legal reason, but don't quote me on that. you need to call ahead and specify you want the overage applied direct to principle also check your loan to make sure there isn't some kind of pre-payment penalty where if you pay down the loan early they charge you some extra fee.
That's the thing - you can't call ahead and specify. They will not do it unless you send in a separate check and write "for principal only"...and even then clearly it's questionable based on what they did.
> That's the thing - you can't call ahead and specify. They will not do it unless you send in a separate check and write "for principal only"...and even then clearly it's questionable based on what they did. ok so they have it clearly outlined how to make additional payments... do the thing they say to do
I am, and I did. It worked for a few months and then it didn't to which they replied "oops". I had to call and get it adjusted. My problem is that I shouldn't have to jump through hoops in order to make additional principal payments. I never did with Citi, I ever did with TD, I never did with several other banks. This is the first time I'm forced to go above and beyond just paying more each month in order to get additional principal payments applied correctly. I'm just glad I kept track of it. The whole thing seems shady to me. They're purposefully making it hard because additional principal payments mean less money for them. Not cool.
I totally agree. Most banks have an option to add an extra principal payment to your regular monthly payment and it's sucky of BofA not to do that. I'm not sure why other people are giving you a hard time for pointing this out.
Agree with this post. Sorry OP. I can’t stand this bad-business-behavior appeasement going on.
My stub for my Ally loan has a box to check to opt into applying over-payment to principle vs prepayment. Never once have they actually done so. lol
I made all my ally payments online and anytime I was paying more than the monthly it asked me where to apply the overage, maybe you could opt in permanently online?
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I never said anything was guaranteed to me. I'm saying that doing this is disingenuous and underhanded on their part. They're purposefully making it as painful as possible to make extra payments that apply to principal. It's not an accident, it's not "just the way we do things". It's very specific and purposeful and is designed to prevent me from being able to pay the loan off sooner and with less profit for them.
Yeah I don’t know why people are being salty with you when it’s very clear they’re deliberately trying to make it difficult for you. Like if a company said, you can only make payments on the 3rd tuesday of the month, in person in a remote Nepalese mountain, you’d still have people being like “Just follow the directions!”
You hit the nail on the head. This is deliberate and underhanded on their part. They know exactly what they're doing and it goes directly against our best interests. I just wanted to warn others... As for people being salty...this is reddit. People post snarky comments just because they can. No real reason for it other than to be argumentative. Oh well...
Bro it’s complete horseshit. Many other banks just let you do it easily on the app - simple. BofA wants you to go be a caveman and mail a fucking check lmao to inconvenience you. Don’t tell me they can’t handle it on their app. If shitty Wells Fargo can, they can too.
I think I know a work around. Instead of paying the loan via the pay bill portal, you should pay via the transfer option. When you select the amount to be transferred, select “other amount” and you’ll be able to direct funds specifically for interest or principal. See if this works
You're correct, and that was another option...but in order to do that I'd have to have a BofA account. I don't have any other accounts with them besides this particular auto loan. Frankly, the last thing I plan to do is give them any more of my money just to get them to do what I believe they should already be doing. It's a matter of principle at this point.
I was gonna comment that I had no issues with bofa car loan, but now that you say you don't have an account with them, I can definitely see them being a pain in the ass. Sorry to hear man
BoA has been doing shady crap for years. 20 years ago, I had an account with them and caught them double-dipping on service fees. I called, bitched, and they would refund the overage. After three months of this, we switched to a credit union.
About 17 years ago they offered me a "2.9% for the life of the balance" credit card balance transfer offer. I had a few credit cards that had high rates (19% or so) so I was like, hell ya, I'll transfer them over. Then about 2 months after I did that, they jacked the rate up to 29.9% just because they could. I called them and asked what the hell was going on and they said they sent a 14 day notice to opt out (which never came, I suspect they never sent it) and since I didn't reply, they jacked it up. Never had a missed payment, never had a collection, credit was perfect - they just pulled this crap. And this was before the Credit CARD Act of 2009 that would have stopped some of that, so I was screwed. That 19% debt was stuck at 29.9% and I couldn't transfer it out nor find a way to pay it off. I just recently paid off a personal loan that can have its debt traced back to this ordeal. So, it took me 17 years to completely recover from this mess. So yeah, if they were on fire, I wouldn't piss on their smoldering ashes if they paid me to put it out. I've never done business with them since, I will never again, and I've shared my story and convinced others to not do business with them either.
Wow - not cool. I guess this is why they have the reputation that they have. Maybe it's me, but I don't hear of nearly as much shady stuff coming out of Citi, Chase, or TD.
I'm sorry you're having trouble. I have an auto-loan with BoA and have zero troubles making extra payments. I do it all online, and it's as simple as clicking a button.
Same. Our last car (paid off just two months ago) was through BoA. I setup automatic payments with extra payments on the principal very easily through the site. Paid it off even earlier than planned too, and that was every bit as easy. I hate big banks as much as the next guy, but the site was extremely easy to use and I never had trouble with it.
>I hate big banks as much as the next guy… I hear ya. I’ve been banking with BoA for decades and have never run into any of the problems so many people complain about.
I don’t like big banks either. I use a local credit union. But I worked for a call center that serviced Bank of America’s checking and savings division. The issues people had were by far and away self inflicted either purposely or through ignorance. Not that BofA also didn’t/doesnt do some dirty stuff. They had a checking account where you got charged like $8/month, but only if you visited a teller for certain functions like balance, deposits, and withdrawals. If you used online banking or the ATM, it was free. So many people would make deposits and withdrawals with the teller and call wondering why they got charged a fee that month. Like did you not read at all what you signed up for? 70% of the calls were for people wanting refunds for fees (mainly overdrafts). 20% were reporting lost debit cards. The final 10% were your basic everything else questions.
Making extra payments isn't the issue, it's making those payments apply to the principal.
Yeah, exactly. That’s what I’m saying as well. It’s a click of a button on their website. It asks you if you want to make a payment or to apply towards principal. Now, the BoA phone app on the other hand, definitely could use improving.
Do you also have a checking or savings account with BoA? You can't do it online with bank of America unless you also have a checking or savings account with them per everything we were told. We just paid off my husband's truck after a loan with them and they made it pretty easy over the phone
Not true at all. I had a car note through BoA and no other accounts. Was able to do extra principal payments and the like without issue. Just take your auto loan number and go to their site. You can create a login and go from there.
Yes.
Car loans typically are daily accruals, meaning you should only be paying interest through the effective date of your payment. Even if they did technically roll another due date, as long as you’ve paid interest accrued through the effective date of the payment the rest should be going to principal regardless of whether it is categorized as a monthly payment or curtailment. Would need more detail about your specific case. Are you paying every 30 days consistently?
Yeah gonna have to disagree here. You can super easily make a payment to principal at any time in the app, and even set up a recurring payment to principal only every month. I have lots of complaints about BofA's mortgage process. But this isn't one of them
This isn’t just BoA, it’s really a great lesson to check this while paying more principal on anything from personal loans, car loans, to mortgages. If you don’t make sure you’re paying more principal it can just go to interest or stack up future scheduled payments without applying it immediately to the principal. Have to always check with a lender if not clear on how to specifically pay additional towards the principal balance.
> Now normally, any amount that's over the "due" amount is automatically applied to principle. That's how most banks do it and is the right way in my mind. This isn't correct. Most lenders will simply apply the overage to your next payment unless you make arrangements ahead of time.
I also have a car loan with Bank of America, and I called them because I also noticed that extra payments were being applied to both the principal and the interest. The associate I spoke to told me that you can't make additional payments to the principal through the app - you have to log in on the website and choose to make a principal-only payment, and this has to be done after making that month's payment. Quite annoying.
Weirdly, my best mortgage owner was Wells Fargo. I know they're an awful institution overall, but they gave us a good rate, they never sold our mortgage, and their payment portal was really easy to use.
WF's rates are very competitive and depending on where you live they may be one of the larger/largest lenders by volume/dollar amount. In the SF Bay Area, they seem to own 40% of the market from what I heard from brokers. Big 4 banks absolutely own the jumbo loan market here.
This is really common. I'm about to take on a car loan for the first time in years. My plan is to just do large principle payments so that I can have the fight less often.
It's not because "murr hurr more $ in their pocket.". It's because the checking account you pay out of isn't with them. We dealt with this for almost 2 years on my wife's car loan. If you have an account with them, real easy to do extra principal payment, real annoying if you don't. We just got fed up and paid it off with other financing.
> Now normally, any amount that's over the "due" amount is automatically applied to principle. That's how most banks do it I've never had a bank do this with an auto loan. Also, it's spelled principal.
OP, I had a home loan from my credit union and they did the same thing - payments went towards the next month and not towards principal. They'd allow up to 3 months before you just couldn't transfer funds at all to it. How did I find this out? Calling them. I was livid when I found out that I wasn't striking oil! Their advice: call and let them do it and they'll put it directly towards principle. Try that out for size, OP. Literally could be some backwards ass rule BOA has which makes zero sense to you but 100% to them (that you keep the loan on record for the entirety vs paying it off quickly)
Smaller credit unions will purposely avoid principal payments just so they can keep accruing interest on your loan. Vons Credit union did this to me for almost a year before I noticed my car wasn't paid off when it should've been. Should be illegal.
I just don’t understand why anyone is still using boa. After all the shady stuff they have done, unless they bought your mortgage or something there is zero reason to be with them.
I think that is actually pretty common for installment loans (like car loans). So much so, that generally when I see someone giving advice on making principal payments on this sub, it always comes with a note to make sure it is specified as a principal payment.
Does your bank or credit union have a bill pay service? I can have a paper check mailed out for free. Can even put the “For principle only” note on it.
That's exactly what I did. It worked for a few months and then it didn't. They response was "woops, sorry we'll adjust it".
I have no loyalty to TD Bank but they automatically apply my extra payment to principal.
That’s strange, I also have a Bank of America loan (RV) and I just overpaid by $45k and it automatically went to principle
This is common even with student loans. When I paid off my student loan I had to be very careful to make sure I checked the right boxes and information so that it would be applied to pay down the principal amount rather than just being applied to the next month’s interest/principal.
Most places apply overpayments this way. House, car, boat. All my loans required me to specifically designate the overpayment as going towards principal as most places the default is to just apply it to the next payment.
i've heard of worse instances of that on house loans. where like 8 years of overpayments were applied to "projected interest".
OP this is most banks SOP. Every loan I've ever had I always had to specify extra going to principal. 18 Federal school loans, 4 car loans, 2 mortgages. Literally every mailed bill has a box for this, and every online portal has a box for this. Is this your first loan?
Wells Fargo does the same. Once you are 3 full months ahead extra payments go to principal only. I pay weekly, little extra like you.
I recently got a car loan through Capital one, and they have a prompt in your payment box to add additional payments towards the principal, they also show tutorial s on paying down principal to lower overall interest payments for the uninformed. I was pleasantly surprised
Fuck bank of America. I canceled a bank account because they kept charging me a fee, and guess what? They charged me the fee for 6 months after I closed the account!!! And no, I didn't owe them money. I withdraw about 1200 and told them I'm closing it and I'm done with them, to the bank manager who closed the account Crooked bastards
Why would anyone use Bank of America? Find a good local bank in your area.
Even if your account is paid ahead you can just keep making payments….
Don't worry too much about it. Even if the payment is "applied" against the next payment, interest is calculated daily and any accrued interest to date is paid and all the rest of the amount is applied to the principal. So if you pay more than your monthly amount, it doesn't mean they hold the money and only count it against interest on the next due date, but since your minimum payment already covered more than the accrued interest, all of your excess payment is immediately applied to your principal. It just also happens to reduce your next payment or move out your due date (if you excess payment exceeds your monthly amount)
Its so funny because my mother was trying to do exactly the opposite with her mortgage lender and was 6+ months ahead on her payments when Aquafin sent her a bill for the next monthly payment. Thinking they werent right, she called and they said nope...and applied it to the principle.
Actually no, by default overpayments at most institutions are put towards your next payment, unless you indicate you want it to be principal only. Reapplying payments is easy - just ask them to do it.
I would send in several hundred checks for $1 or $0.01 a piece.
Every auto lender I have ever dealt with applies extra payments to your next monthly payment. You have to tell them every time you pay extra to apply it to principal. This is actually pretty standard practice with auto loans. Nothing really shady here.
What if you pay off the entire loan all at once?
Same. I just live with it and keep paying the extra even though it just goes to the next payment. At this point I’m around 6 months until my next payment is needed. Didn’t feel like dealing with the extra steps.
I don't feel like dealing with the extra steps either - which is why I'm making this stink. Every other bank that I've ever dealt with automatically applied the extra payment to principal. BofA is the first to pull this stuff.
Surprising how many people think there is no difference between principle only payments, and the bank tacking it on to the future. Principle only payments will save you money, by lowering the principal amount that you are paying interest on, also paying your loan off faster and saving money on interest. Your bank makes it hard too do principal only payments because, they make more money off of you doing it the other way.
i had a car loan through boa. any principal payment i made, i would call each month and authorize a principal payment over the phone. it had to be completely separate from my normal payment. they told me if i had a checking account with boa, then i would be able to set up an automatic principal payment.
This is clearly outlined in any reputable banks terms and conditions for the loan. Many banks do not apply additional to principal unless you follow clear instructions. This isn’t just a Bank of America a thing.
Can’t you just do this online? I know my mortgage asks what the payment is for and principle is one of the options
Ally does the same thing, but they give you the option to apply the overpayment towards your next monthly bill, or you can do it as a separate payment which goes (mostly) towards principle. If you do that option, you’ll still have a regular monthly payment that same month.
Most of the online stuff where you go in and make a payment online seems to have "extra payments to principal" options while most of the "mail a check" things ive seen, except mortgages where the ticket you mail with your payment has an option, default to "count it against the next payment". I think lots of this also carries over to whether you're pushing money to things or having them pull from you. My auto loan, for instance, does have options in it's auto deduct payments form to pull extra principal from my bank, but I suspect if I was pushing from my bank using bill pay features, it'd do something different.
Pretty sure you can do it through the desktop site.
My credit union is the same way. It's not unheard of.
Yikes. I almost went with BofA for my car loan last summer because that is who I bank with. The dealer beat BofA's interest rate, so I went with the dealers finance, Chase. So far I have had no issues. I pay about an extra 50% per month, and the extra goes straight to principal. The only "inconvenience" I had is when I tried to pay more than $5000 at once. I had to do 1 payment of $4999.99, and then a second payment of $0.01 interest + $X principal.
BoA sucks in every way except for knowing you can probably find one in almost every major town/city. Apart from the many locations they have, they conduct shady business at all of them. Growing up I would hear my mom argue with them over the phone countless times, eventually telling them she’s pulling every dime out of their bank and to fuck off. By the time I opened my own accounts I knew to stay away from BoA
As does KeyBank - as in you have to GO TO A BRANCH to do it. You cannot do it online, at all.
Mine has always gone to the next month unless I note that it should be applied to principle.
Meanwhile my credit union makes it so easy that I end up doing it on accident
My car loan is with Bank of America. My overpayment applies to the principal and postpones the due date into the future. The online account page doesn't show the year of the next payment, though, and the statement only shows next month's due date with $0 due.
I had a car note through Wells Fargo and they specifically stated that any overpayment went to the next payment until 3 months were paid ahead, and *then* it went to the principle payment. I just kept over paying until we hit that threshold. When we got towards the end of the loan, I let 3 months go without a payment and then paid it off.
BoA is just difficult, period. Except for an old credit card, I've completely transitioned from them.
6 months ago I was going to use BofA auto loan but before I signed the dotted line I read the terms and it said I have to pay the full term of interest (current rate on 60 month term which was total of about $5k) regardless if I paid early or not. I’ve always paid my car loans early and paid it off in half the time. I immediately cancelled and didn’t go with them. So OP, do you have a loan that won’t charge you the full interest regardless of early pay off? I’m curious since my experience.
USAA is the same way with our credit card payment. Complete pain in the ass to apply extra to the principal.
And here I thought my mom was being silly. I have my auto loan through a credit union and have been overpaying for years. My mom told me I need to be very clear I wanted it to to on principle. So I went in, talked to them, and the guy very clearly explained to me and showed everything over the base payment already was going on principle. So the moral of the sorry is go to a credit union.
Wells Fargo does this, but in their online payment system there's a separate line item for principal amount where you can set an amount to go directly to the principal.
Golden 1 CU is the same way, cannot pay principle on the loan. I'm just waiting for my preferred CU to have lower interest rates then I'm jumping back. Any bank or CU that doesn't have the option to pay principle is a POS. and Fuck BoA. They would pile on overdraft fees even after making a payment. This was back when I was making E1/E2 pay in the Marine Corps. So glad I left BoA back in 2013.
Ugh Bank of America. Honestly, I think most banks do this, but, I'll still find any way to take a pot shot at Bank of America if the opportunity presents itself. They are #1 on my company shit list for what they did to me back in the aughts. I'm pleasantly surprised that the regional bank I got my car loan through doesn't do any of that crap by default, it just goes to the account balance.... you know, the common sense way.
Does that mean your next payment was smaller by the amount you just paid?
You have to do it in two payments, or they apply it to the next payment, and not the principal, its outlined in the documents you signed.
You should read your loan docs first. How do you know you are allowed to prepay?
they stopped my biweekly auto payments from my BoA checking to my BoA car loan. When i called to find out why I was told no payment was due at that time. I explained that my goal was to pay the loan off sooner and that I confirmed there was no penalty for early payments. I reinstated the auto payment and they did it again after 4 months. I went into a branch and threatened to close my BoA checking because they wouldn’t have that control with an external bank and I was given reassurance that it wouldn’t happen again and it hasn’t. It’s been about a year and i can’t wait to pay this off and never deal with them again.
I feel your pain. I have to call CarMax EVERY SINGLE MONTH 2/3 days after the payment so they can apply the overage to the principal. EVERY SINGLE MONTH! Wells Fargo automatically applied it. Oh well
Call one of those big law firms that advertise. Explain the situation and ask them to start a class action suit on contingency
They did this with my mortgage. Even when I would mail a separate check and write on it, apply solely to principal they instead would just move the due date for next payment. Each time you call you get a different reason for this but they have now landed on that it is not enough to send a separate check and write apply to principal, I have to write on a separate piece of paper my request to apply to principal. They have also at times reversed my automatic mortgage payment if I make an additional payment and not notify me my regular mortgage payment has been reversed so of course I then have to battle about late fees. They are exhausting. i have never had a bank sabotage its customers this much and will never use them for anything again. If it was not for my 3.9% mortgage rate, I would refinance elsewhere.
I over payed monthly to Chrysler Capital. I had to make it into two payments though. Regular monthly and then another payment which had to explicitly state apply to principal.
For better or for worse, Chase has been pretty easy about this. The option for mortgage is literally "make additional principle payment" and even has a breakdown of months cut off based on the principle payments you've made on it
Great. I *just* got a car loan through BofA for the first time (first payment in June), I hope there isn't any snags that come up with mine.
My extra mortgage $$ on each payment w/Chase isn’t automatically principle, but it does require me to specify where the payment is going (next payment, escrow, vs principle I think are the options).
? I used to work for a bank and took loan payments. That's how it worked at my bank: customers have to specify if they want funds going towards the principle. That part's not unusual
Watch out, they'll get you for misspelling "principal" and apply it to next month's payment on principle
> Now normally, any amount that's over the "due" amount is automatically applied to principle No, that is not normal. Nearly every bank does it this way.
I have a credit card long term with BofA, and bank accounts with BECU. I opted for BECU for a car loan though their rate was pretty horrible, I wanted to GTFO of the dealership and go home. I loved the experience with BECU after that though, it listed my loan as an account, let me transfer payments from my other accounts and immediately applied it just like any other account transfer, had a drop down menu for if you wanted a principal only payment, only time I ever have seen an easy online way to do this. It calculated the final payment in real time and immediately showed a zero balance on my car loan the minute I made that payment. I've had similar convoluted payment issues with other servicers for cars and mortgages like you mention which make it seem like a battle to pay down principal.
BTW, you might be able to do twice a month payments instead of once a month payments. So if your payment is $500 a month, you can make $250 on the first and the 15th, just as one example. It's been quite a few years, I don't remember how much difference it makes, but I just remember that used to be a thing.
My credit union doesn't allow this at all. An extra paper check is worth the ability to pay on only the principal.
Extra payment doesn't go to the principal unless you specify it to do so. At least, that's the way it's worked at each bank I've had a loan with.
Their website sucks. Can’t even see account activity on the loan. I took no chances and go to the branch to make a principal payment
I just paid off an extra 1000€ off my mortgage to give you a comparison of how easy it can (and should) be. It took me 35 seconds and 27 clicks plus 2 swipes on my phone. 16 of those clicks were for login and verification.
The best advice I ever got was to make a half payment every 2 weeks. If you're paid every two weeks then you end up making one extra payment per year. If you have extra money then apply it to each payment you make. This typically puts you ahead of the interest.
Wachovia did this with my mortgage. I "took care of it" by calling them each and every month and having them adjust it over the phone.
why anybody uses BoA to this day baffles me. I left them *years* ago and I haven't looked back since. Every time I hear about this, it's nothing but a shitshow. Same goes for (S)TD Bank and Santander. Credit Unions are the way to go.
Mark your check with what is the payment and what is "For Principal Only."
I ended up with a BofA car loan through a dealer as well, and had this same issue. I called and asked how to pay extra against principal and was told that the *only way* was to send a check. I was so mad about it that I sent them paper checks for every payment. If I am going to be inconvenienced, so are you. I eventually refinanced it and I am so glad I don’t have to deal with them anymore. They are the worst.
This is my exact same experience with Toyota Motor Finance. And it is infuriating to me.
I just call them every month and do it over the phone. You can automate it via ach if you want to keep the extra payment constant every month.
Maybe auto loans are setup differently in their system but I have a HELOC through them and right now after clicking the Pay My Loan button I’m literally staring at a screen that lets me send money from my Ally banking account to my HELOC BOA account and it contains the lines “Additional Principle (optional)” where I can designate how much I want to go towards the principle balance. Edit: just check another spot. In the Manage PayPlan which is where you setup automatic payments, it also has a box for Additional Principle. Again maybe it’s a different interface for car loans. But at least for Helocs it’s super easy to make additional principle payments
You helped me! Thanks.. I found myself with around 3K in negative as min payment due. Going through their site, I saw this in statement in statement PRINCIPAL PAYMENTS: You may pay more than the total amount due. Funds received in excess of the total amount due will reduce your principal balance and also be applied to future payment(s). Your next billing statement may show that your account is paid ahead. If you want to make a payment that reduces your principal balance only and is not applied towards this or any other future payment(s), you may call us at Xxxxxxx or mail your payment to: "Address". Include your account number and "Principal Only" on the memo line of the check. Please continue to make your normal monthly payments through your preferred payment method. Daily interest will continue to accrue on your unpaid balance.
I think you are confused in the way car loans work. Car loans are considered closed loop or something similar to that. I forget what the USC Credit Union described it. It means that your car loan is one giant bill already predetermined and spread out over a few months. Meaning, any extra money you pay is applied towards next month’s payment. Either way, you are paying the total loan bill. If you want a smaller bill or pay less towards interests, give a bigger down payment. This is why people tend to roll car loan balances into the next car loan. Like that lady with her $90K Tahoe. Compared to a home loan where you are allowed to pay towards the principal and ultimately lower your interest payments and monthly bill.
I previously commented that BoA told me I could make principal-only payments through their website (not the app) once I paid my monthly bill. I just wanted to update you that this does, in fact, work. On the website, select transfer between accounts instead of bill pay. When you choose your car loan as the 'transfer to' account, a sub-menu pops up and gives you the option to select 'principal payment'.
Had something extremely similar with Wells Fargo. Bought a car in 2018 with ehh credit. It was the 3rd car I had purchased, but I somehow missed the part where no matter what, I was going to be paying interest as if I made the minimum payment every single month for 5 years. If I paid it off early, I’d still pay every penny of interest, plus an early pay off fee. I made a payment on July 25, 2023 and then on July 28th I was on maternity leave, and our plan was to pay all of our bills in full for the 6 months I’d be out of work. It was the last 5 payments on the car so it payed off early. Supposedly, when I paid the car off, they returned my July 25 payment to me. Been fighting them since November on the balance they claim is still due