Velocity Banking: the Fastest Way to Eliminate Debt
“If you understand the financial system we are on, velocity Banking is no brainer.”
Are you putting all your cash flow towards your loan(s)? I don’t blame you. That’s what we are all programmed to do. But have you taken a step back and considered if there is another way?
Well, there is.
That extra money you are throwing at your debt every month in futile attempt to pay it off faster can be better utilized to get an even better result. And the good news is, it’s cheaper than what you are doing now.
Say hello to Velocity Banking.
What is Velocity Banking?
So what is velocity banking?
Velocity banking is a financial management strategy that leverages other peoples’ money (OPM) to pay off your debt faster without the opportunity cost associates with loosing your cash flow. You can accelerate your debt payoff without…
- Getting another job
- Working overtime
- making extra payments
- changing lifestyle
- or consolidating your loans.
Velocity banking is both cheaper and more efficient than the debt snowball, debt avalanche, and debt consolidation method. However, velocity banking might not be for everyone. See if it’s right for you with the pros and cons.
How Velocity Banking works?
First, you use the banks money to put a huge payment towards your amortize debt. This is called chunking or sweep. Then when your paycheck comes in, you dump the entire amount into the line of credit. This will benefit you three ways.
It will…
- Stop interest from occurring on that line of credit. Saved money on interest means more money in your pocket and faster pay off.
- Push back the due date on that simple interest line of credit.
- Use your income twice. Yes, the velocity banking method allows you to use your paycheck more than once.
How is that possible? I’m glad you asked.
When you get your paycheck and transfer it all in to your line of credit, you automatically satisfied that month’s payment for that line of credit. It is count as a payment.
But the beauty of lines of credit is that they are open ended, also known as revolving credit. Which means you can put money in and take money out.
So, the same income you just moved into your line of credit can be access again to pay the rest of your bills without fees. Thus, you’re using your income twice. Once for paying the line of credit, and then reusing it to pay your bills.
What stays in the line of credit is your cash flow (that extra money you used to sent to make extra payments and don’t get back), is now helping you bring the balance on the line of credit back faster so you can make another big chunk.
What types of debt will Velocity Banking Method work with?
The Velocity Banking strategy goes by many names depending on the regions or country is used. Sometimes it’s referred to as “sweep strategies”. Other times it’s called mortgage acceleration.
This can easily confuse anyone hearing about this method for the first time. They can easily think that velocity banking is for mortgage payment only. But this is just not the case.
Velocity banking strategy can be use to accelerate debt payoff of any amortize and non amortized loan. You can implement the velocity banking method to speedily eliminate everything from student loan, car loan, credit card, mortgage to any other amortize debts.
How is it possible?
What makes the Velocity Banking strategy so powerful?
The power of velocity banking lies in the ability to make huge payments toward debts.
For instance, with debt snowball method you limited to
Velocity Banking Example
Here is a video showing how a couple can payoff of $110,000 mortgage in 2 and half years by implementing the velocity banking method.
Velocity Banking for my specific situation?
Although results will look different, anyone can implement velocity banking in their finances. What determinants your success are your numbers. The two prerequisites for successfully implementing the velocity banking method are healthy cash flow and access to line of credit.
1. Cash flow
velocity banking does not work if you don’t have cash flow. Your cash flow is what drives the drives down majority of the debt. The bigger the cash flow or spreed, the faster you can bring backup the balance on your line of credit.
2. Line of credit
Velocity banking is about leverage, without access to OPM on a revolving line of credit, it’s impossible to do.
Velocity banking is a must strategy to implement in your your debt payment plan. It is simple, cheap and efficient. It will save you hundreds and thousands in interest, and cut years of payments.
Are you doing velocity banking in your personal finance? What do you like and not like about this concept?