Barefoot Investor slams TikTok user says Aussies can avoid paying interest on their home loan
What Barefoot Investor thinks of TikTok video helping people ‘never pay interest’ on their home loan
- A TikTok user revealed his plan to avoid interest payments
- It involves paying an extra dollar on a monthly installment
- The Barefoot Investor called the plan ‘stupid’
Finance guru Scott Pape has labeled a TikTok user’s ‘plan’ to avoid paying interest on a home loan as ‘stupid’ – as more Aussies look for ways to manage their repayments amid rising interest rates.
TikTok user Mike Indigo uploaded a video to his account revealing a way to “beat the banks” and “stop” compound interest on your home loan.
He first outlined how a monthly repayment consists of ’70 percent interest’ and the remaining ’30 percent on the principal of the loan’.
He explained that you can ‘avoid’ the interest by paying your regular principal plus an additional dollar.
“If you have mortgages, if you have loans, the best way to beat the banks is to stop playing their game.Mr. Indigo began.
The Barefoot Investor Scott Pape (pictured) denounced the man’s ‘plan’ in his response, saying it was completely ‘stupid’
‘How do you beat them? Well, you need to prevent compound interest from building up. How do you do that? If you pay $1000 a month, you pay an extra $30 – and you pay $1 a day to your bank.
“As I said before, compound interest goes up during the month and when you make the payment, it goes down by 70 percent.”
The self-described financial enthusiast said this method means “you pay a fat zero in interest,” that it “cuts your mortgage from 25 years down to about five,” and could be applied to any variable-rate loan.
Just stop paying interest. Nobody out there has to pay interest,” he continued.
He added that the bank will send “you” letters to prevent this from happening, but he begged his viewers to “ignore” the letter and beat the banks “by not paying compound interest.”
However, Mr Pape has completely rejected the plan saying the bank simply would not allow it.
“Okay, in our house ‘stupid’ is a swear word, but I call it what it is: this is STUPID!” said the author of Barefoot Investor in response to the video.
“You can’t stop interest by paying $1 a day on your home loan.”
Still, that won’t stop people from trying. There are thousands of comments under the video saying things like, “I’m not sure it’ll work, but I’ll try!”
TikTok user Mike Indigo (pictured) uploaded a video explaining how to “avoid” paying interest on a home loan by paying your regular principal plus an extra dollar
The financial guru added that the only way mortgage holders can pay off a home loan faster is if they get a lower interest rate and make additional repayments (stock image)
Mr Pape said he draws three main conclusions from the video, which has been viewed more than five million times.
“First, people are desperate for solutions to higher interest rates,” he said.
Second, just because a video goes viral doesn’t mean it’s true — it just means it rides the TikTok algorithm (AKA the Chinese babysitter).
“Finally, I still have a lot of work to do when it comes to financial literacy in this country.”
He added that the only way to pay off a home loan faster is ” to get a lower rate and make additional repayments…preferably more than $1 a day.”