A woman is going viral on TikTok after warning users against buying cars using money loaned by a financial institution. Surprising many, given that’s how most people buy cars.
Barbara (@barbaraveloz8) said that buying a car using loans is a “scam,” in part, because of high interest rates.
“I’ve been paying off $11,000 of debt for a year and a half,” Barbara said, noting that amounted to $332 per month. But she said that, of that amount, little actually went toward the debt, while the remainder went toward interest.
“I’m up to $10,000 and I thought I was almost done,” Barbara said. “So that means Westlake Financial is charging $200 and up for interest and only $70-80 is going toward the debt.”
Given her current predicament, Barbara encouraged viewers to buy their cars in cash. As of Saturday, her video had amassed more than 42,500 views.
“Take the bus until you have cash,” she said. “The best budgeting tip is do not finance a car.”
Content creator laments high interest rates
In a follow-up video, Barbara said that she’s the first member of her family to own a car. As a result, she said she’s still learning the ropes for how to make payments and ensure she’s not spending more than she needs to.
In another clip, she said that borrowing money from bank lenders is a “legal scam.” She said that the “system” is prejudiced against people who are in the process of building their credit and favors those who already have a good credit score.
While Barbara didn’t reveal her specific interest rate, she suggested in a response to a comment that it exceeded 10%. To help save money down the line, one viewer suggested that Barbara refinance her car and others said that she should try to avoid loans with high interest rates in the future.
“Babes I don’t do anything over 4%,” one user said.
“Anything over 8% is crazy,” another added.
Tips for saving money on car payments
While there might not be much to do in order to combat a high interest rate, there are money-saving methods that loaners can utilize to pay loans off faster.
According to Bankrate, one tip is to make payments every two weeks versus once per month. It said that making twice-monthly payments will give interest less time to accrue. And, with this strategy, loaners will technically make 13 yearly payments instead of 12. This, they said, will speed up your repayment.
“It helps move you toward an early payoff date without significantly increasing the amount you put toward your loan each month,” it wrote.
To show viewers what this might look like in practice, Bankrate demonstrated how much the owner of a four-year $48,000 auto loan would pay with a 7.8% interest rate.
In this example, someone making biweekly payments would owe $583 every two weeks, while someone paying once per month would owe $1,167. It noted, too, that the biweekly payer paid less interest ($7,173 versus $8,031). The time to payoff was lower as well: 40 months for the biweekly customer and 48 months for the monthly one.
Not all lenders accept biweekly payments, but it’s good to check before signing anything.
Meanwhile, according to Lending Tree, other strategies for paying your car loan early include making a lump sum payment and paying more than the minimum each month. It said that borrowers with a high interest rate (and, specifically, those with low credit scores) have higher interest rates and benefit the most from paying off their loans early.
“You could save a substantial amount of money by paying your car loan off early because you’ll make fewer interest payments,” it said.
Viewers offer advice on car loans
In the comments of Barbara’s video, viewers confirmed some of the tips shared by financial institutions such as Bankrate.
“If you split the payment in half and pay it biweekly more will go to the principal,” one user said.
“Cash is king,” another added.
“Split it.. Pay every 2 weeks, not every month,” a third person echoed.
Others, however, said that they could empathize with Barbara because they’ve been in similar situations.
“I wish someone told me earlier,” one woman shared.
“It’s the worst,” another wrote. “Omg it pisses me off.. I throw 1 to 2k to principal payments just to cut the amount I owe 6k left.”
And some people said that Barbara’s horror story left them wanting to take her advice regarding taking the bus.
“I wish someone told me when I was 20,” one viewer quipped.
@barbaraveloz8 Budgeting tip #finance #investingadvice #financialfreedom ♬ original sound – Barbara
“No thanks I got 2 kids,” a second viewer said.
The Daily Dot has reached out to Barbara via TikTok comment.
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The post ‘I’ve been paying off $11,000 in debt for a year and a half’: Woman says you should never finance a car. Here’s why appeared first on The Daily Dot.