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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.
Nelnet does this with my student loans
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.
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
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.
Are you sure they weren’t applying the extra to your balance on the date of payment?
Most banks apply the payment to your balance and just so happen to push the due date forward.
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 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.
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.
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.
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.
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.
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.
I have a home loan with BOA and they always apply extra payments to the principal. They also give me the lowest credit card APR of any company, 8.9%, so overall can’t complain.
I know it’s a pain, but just an fyi you can go into the branch and the teller can apply principle only payments for you.
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.
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?
Can’t you just do this online? I know my mortgage asks what the payment is for and principle is one of the options
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.
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?
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.
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.
I have no loyalty to TD Bank but they automatically apply my extra payment to principal.
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?
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.
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 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.
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.
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.
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.