He is also not mentioning the cash flow from eliminating the debts. So the $644, $100 and $284 a month they had in payments to these 3 debts actually gets moved to their cashflow. That money, moving to a revolving account, can be used again if an emergency arises, instead of just being thrown at the debt and that’s it, you can’t use it anymore.
Yeah, he's definitely not doing it right. Don't blindly trust people when they throw out titles and credentials. Learn it and do the calculations yourself.
@@ryebread447why do you need an emergency funds if you can have low interest credit cards or lines of credit? That advice is so old. It was valuable before credit cards. Today you can pay anything with a credit card.
Velocity Banking actually is not just using a higher debt weapon to pay down your debts. The part that you forget to mention which is the greatest piece of Velocity Banking is that you create more cash flow than your original cash flow and this is where the magic is at. The second benefit would be that you would have money available to you if something comes up because if you put all your cash flow into a mortgage you will not be able to use that money again. Thank you for showing how Velocity Banking works
Well, if you make extra payments towards your debt principal amount while keeping the line of credit open 9n the side with zero balance for a rainy day, you cut down your debt faster while having the comfort of available line 9f credit in emergencies. If you didn't had to use line of credit for emergency and debt is paid off faster, you win. But If you had emergency you have zero balance line of credit to fall back on so extra payments towards the loan cannot be reused argument doesn't apply. Keeping it simple while cutting the debt faster should be the goal. Why arrive at destination via scenic route when highways exist for simpler yet similar outcome.
@@user-wy2ud4xx5q lol that is exactly what Velocity Banking is. You are the one creating a problem for yourself when your raining day comes. Now you have another payment and now you have to worry about what the amount will be going on that extra principal payment. See the problem that most people fall prey to is segregated income. But with Velocity Banking you will never fall prey to this trap! So you right keep life simple by having all your income moving in one direction.
@@user-wy2ud4xx5qif you use the line of credit as an emergency, you would create a payment due for that line! In the example above, you would be at a negative cashflow! VB gives you cashflow throughout the entire process.
In your example where you consolidated all the balances into a credit card, you still subtracted only $1028 monthly. What happened to the extra money leftover from not making the monthly payments from the truck, credit cards that are now paid off? Did you assume it was spent elsewhere?
@@shawnhandley548 Oh my goodness gracious. This guys shouldn't be embarrassed. Maybe rewatch the video and add up the three payments prior to the consolidation.
@heatherm2428 Also … with velocity banking when you make payments, you make that money available to you … you’re making extra payments but not breaking the bank … not sure how he or you are so confused
Can you show the annual 10k to a mortgage to see any savings? If there is a 500k mortgage loan at 7.35% and 10k is placed on it annually from a HELOC it should be paid down in 17 years meaning the HELOC cost s 10,267 per year x 17 years or $174,539 while the mortgage is paid down saving $370,128 or a difference of almost 200k in interest savings by paying it off in 17 years vs 30
I'm not trying to be for or against either argument but you didn't take into account some money. You just reallocated the money used for the loans and not their total money allocated to loans + rest of their income. So it isn't an apples to apples comparison to see if you would of saved money if you ignore their other money.
Wrong you don't take out money with cash advance. You put money into a credit card before one of your bills are due like electric bill propane bill etc. Once that money clears that you have put into your credit card then you pay your electric bill propane bill etc. It satisfies your monthly payment and freeze up that payment to put towards another that you're trying to pay down.
Mr. MBA.... your degree eludes you... because you have the concept of how can a higher APR pay off a lower APR efficiently, and this you left out key components of what makes velocity work. However in scenario three your math proves it even though you neglected said key components. Also dont neglect the the 44 dollar savings (11 a month) compounded over 360 months at even just 5% interest. Almost 10k. And that's with ley components missing. I was looking for holes in velocity banking because I'm researching... but Mr.MBA you have done a disservice
It’s excellent for if you have no “cash flow” and you can use one of your credit cards as the velocity instrument. That immediate cash flow gets you back in the black with a little a breathing room. Once you get that one paid off, you can use one of the more conservative methods to pay down your debt.
But how does this help? Even the highest rate mortgages pale in comparison to average credit card interest. You’re doubling your interest for what end?
Thank you for the video but I am still confused. Most of the velocity banking shows a 10k heloc and to take a 10k chunk from the mortgage, pay down the HELOC with monthly checks and then do it again annually to reduce the amortized mortgage interest. Your example at 14:45 shows a transfer of the entire loan from the HELOC to the mortgage
I think how velocity banking works is amazing. I think it reaps larger benefits when you are able to pay down larger balances more quickly by increasing your cash flow. Paying off a 30k car in 24 months is way better than 60 or 72. It also frees up cash if needed for those living pay check to pay check.
But Heloc’s DON’T have a higher interest rate the a mortgage! Read your disclosures and amortization charts! You are paying a massive amount of interest and will often pay twice what you borrowed.
Depends on the market. HELOCs are adjustable rate. My mortgage rate is 4%, and my HELOC is at 8.5. I ran a simulation to where the HELOC needs to be less than twice the rate of my mortgage to work to my benefit.
@@russellhaskett6830faulty thinking. Heloc uses simple interest. Mortgage is amortized. If you look at your mortgage’s amortization schedule then you will see that you’re paying 2x times the purchase price over the life of the 30 yr mortgage. Your mortgage’s APR isn’t your actual interest rate. By following VB, you pay your income into the heloc, lowering your avg daily balance, and lowering your interest/payment due. Cashflow (and spending discipline) is the key to VB success.
I'm always willing to listen to both sides of the house on any subject, credentials don't mean shit anymore, your exactly correct math don't lie! I think your case would have been better made if you did a react video to one of the VB influencer's videos, breaking down their example and why it would not work. Your case here was kind of weak and difficult to follow along. This is just my observation and reading through most of the comments.
No one Ive seen in velocity banking is talking about using a 21% interest credit card. Theyre talking about using a heloc and peloc at 9% interest. Additionally if you can payoff your loans in 13 months with no cashflow velocity banking isnt for you.
"Just deposit your extra money into the mortgage" -- is exactly why you don't get the VB idea. It's not about saving money but having more cash-flow at a marginal cost. I could see it being very useful for people. Not having cash-flow can be horrible and expensive... For example, the gas is out because you miss a 35 dollar payment, the Gas Co. can't come and turn it on for a week.... and then they charge you 100 reconnect fee. No cash-flow cost money and destroys your quality of life. With the VB method, a few months in you can have more breathing room. And maybe get there faster? (I haven't tried it though, but that seems to be the draw.)
I am confused. He has all of these degrees and experience and I believe his calculations are wrong on the 1st example. His math ain't mathing! He says the truck loan would be paid off in 12 months, that seems reasonable based on the payments/interest and balanced owed. However, the math ain't mathing for the loan or the credit card! The CC with a $1500 balance and $100 monthly payment would not take 13 months to pay off. By simply math, not accounting for the 21% interest rate, it would take 15 months to pay off (that is simple math of 1500/100). Further, there is that interest rate he fails to calculate for, which adds about $26 a month in interest. This bring the $100 paymemt down to $74 a month. I would say this credit card will be paid off in 21 months. He states the loan with a $3500 balance and a monthly payment of $284 will be paid off in 13 months. He is a little closer on this one but still off. I calculate that after accounting for the monthly interest of 28%, this loan it should be paid off in 17 months. So, based on simple math and his examples the CC and the loan being paid off in 14 months through VB will save this person the monthly interest payments they would pay to the CC and loan beyond 14 months. Most people who do VB will secure a PLOC or HELOC with a much lower interest rate and the ability to transfer money to loans or CC without a 4-5% balance transfer fee from a CC. Another thing he fails to mention is why do these people who promote VB promote it? They don't get any kick back from someone going and securing their own PLOC through their personal bank. They don't get a kick back from the CCs or loans from being paid off early due to VB. What would be their motive for pushing this payment method over maybe snowball or avalanche debt payoff methods? There simply isn't any benefit to these people pushing VB other than helping people get out of debt quicker. But maybe I am just confused! I stopped listening after the 1st example.
I ran my numbers in a couple of spreadsheet as well. I could see that with velocity banking (HELOC) I'd be able to pay down my remaining mortgage balance early, but not earlier than by making extra payments. My takeaway was that using the HELOC only provided the flexibility of having access to extra cash for an unbudgeted expense - at the cost of less money going toward the mortgage. The same is the case with making extra payments, but an unexpected expense would either have to be covered by credit, tapping into an emergency fund or reducing future additional principal payments until said expense is covered. Either way, velocity banking turned out to be a moderately higher interest version of what I can already do without a HELOC.
@@24_Delta HELOC also has fees to set up and create... The people shilling this velocity banking want to make money off of setting up this stupid method. If you ever did get into a place where you needed money you could take out a loan on your house equity
You could just have the HELOC and only use it for emergencies. The ones I have looked at don’t have any fees and usually beat a credit card interest rate.
I accept your apology for bursting my bubble in thinking that velocity would work, Haha! You're right, mathematically it doesn't work out. After seeing all the positive comments towards velocity banking in other people's videos, it seems the benefit of velocity banking is the "positive emotions" derived from thinking that you're actually beating the system. I guess that's better than feeling miserable, right. Thanks for your video!
I think you nailed it! The benefit of VB is positive emotion from thinking you're doing something that works. Sure, it "works" in the sense that they're paying down debt, but it doesn't work in the sense that it's an inferior strategy to simply paying off a loan directly!
@@xephael3485 do you have a mortgage if you do check your paperwork look at the fine print when you signed for a 4 percent interest rate it’s really more like 60% percent interest rate throughout the whole 30 year loan I know what I’m talking about if you don’t educate yourself
The Velocity Banking process w/ a HELOC can actually work, provided that the HELOC has a lower rate than the mortgage. You're assuming in this video that the HELOC has no limit, and that the interest rate is higher than the mortgage itself. Something also to take into consideration is that the HELOC compounds daily, while the mortgage compounds monthly. Additionally, when you withdraw from the HELOC, you generally have a minimum amount you can take out (in my case, that is $5000 with the particular CU that I use). Also depends on the type of HELOC you get. (Mine's a 5/10 at a fixed rate 2 points lower than my mortgage(s)). So, in this case, Velocity banking mathematically works if you are dumping a mortgage onto the HELOC in chunks, or as a whole. Thanks for sharing this video though! Very helpful to see different sides. **Everyone's situation is different.
But why cant use your pay check to pay the loans direct...why need credit lines to pat it then swap pay check to credit line ? Whats the purpose of this ?!!
@holypunk12 of you pay money directly to loans the liquidity goes to money heaven. you need a line of credit for emergencies, since your socking away all you excess cash flow and savings into the loan. also a heloc is daily simple interest. so if you have decent cash flow and your chunk size is appropriate and you paycheck park at the beginning of the month and load as many expenses onto a CC and pay off the CC at the end of the month, then it ask works fine. a close 2nd, without the hassle, if your generally debt free and only have a mortgage is when you dump all your free cash flow reach month directly into mortgage principle pay down each month and have a heloc on the ready unused for emergency expenses, so you don't get screwed pushing all free cash flow into your mortgage note
The one scenario I think it can work is if you have a maxed put credit card like I did. I can lower my daily balance by paying it down with a good portion of my paycheck each week. That will save interest. Then pay my bills with the card and earn 5% cash back which will offset more interest. And make sure to pay more down than I use it every month and try yo pay my bills towards the end of the month. I should be able to offset interest two ways this way and pay it down with left over cash each month.
What you're forgetting to factor in is that not only will you be paying less interest on your home loan, it's a smaller amount being taxed in the HELOC for a shorter period and as simple interest.
What?? Kind of hard to follow tbh. Car loan showed vb 11(OK, 11 mos plus 1 mo for the small balance) months paid vs 14 mos leaving as is and pay more monthly with extra cash flow. How would leaving the loan as is and put more towards it for a 14 month payoff be BETTER than the vb payoff of 12 months?
Youre missing a few details. Cash flow positivity is key, you dont get a 2nd lien HELOC, you get a 1st. Principle and time are your biggest enemies. The interest rate on a heloc only determines your payment that day.
@@tommyj1116 not every HELOC is second, which is my point. They're not nearly as efficient in the second lien because, as you correctly stated, you still have your mortgage payment. A 1st position HELOC take the place of the mortgage.
I just heard about velocity banking today and I math just wasn't working for me...I just couldn't see how it was paying it off any quicker assuming you're actually accounting for interest and balance transfer fees on the credit card you're moving the debt it.
I used this to pay down my debt super fast. It is in no way a scam; however, for people who have a spending problem and cannot control their spending and live on a budget, this could be bad.
@@therealtred4971 then what did you use to buy your property? If you're taking on debt for property it's generally a mortgage or a private loan from rich family
My issue with the first scenario is that I haven’t seen (personally) anybody saying to use high interest credit cards for velocity banking. I see people doing balance transfers to zero credit CC’s for anywhere from 12-18 months. I get these offers in the mail constantly: 4% balance transfer and then zero interest for 15 months, just got an offer yesterday in the mail. I could see that working for any high interest balances.
It reminds me of an Amway rally I went to years ago. They all got up to show " Their plan" they were all the same, but with their personal story. I went because a relation was interested. The reps were their own best customer for product. It was about getting others into the system.
Velocity banking does work, it is dependent on the extra money you have available per month. It worked for me and it should work for majority of the people.
Try this: if you have extra money available, just make the extra payment on the mortgage. If you do the math, it would work out to the same. You won’t have the mess and fees to open a heloc + no risk of increasing rates.
@@graecisumIn VB term the extra cash flow is called cash-flow. Now if you have multiple maxed out CC, car loans, a mortgage, medical bills How do you throw extra cash at them in the most efficient way? That’s where VB is useful because it brings methods to madness. Without VB traditional financial systems have been failing people. Why not try something different? It’s not a scam. Either it works or does not. Cancer treatment is not a scam because the patient died….
whats the best approach if I have 80k in credit card cards and $120k in equity in my home. my plan was to pay off all the debt and add 3/4 of the savings monthly from paying off the debt as an extra payment to my principal mortgage after the refinance. ?? thanks
There's a ton wrong with this video. The premise of VB is that you do have a pretty big margin in your personal budget to apply to your debt. No one advocates that you put a balance on a heloc and leave it outstanding with no payments for 30 years. Ridiculous.
He also never said this in the video. He’s advocating just taking that margin and applying it to your mortgage directly. What this video made me realize is that velocity banking assumes the minimum payment is the only option until you magically take out a HELOC.
@@WMDistraction But a person can't comfortably make massive payments to the mortgage for fear of not being able to get it back out. The heloc solves that problem.
@@AnonymousPerson488how? You still have to pay the mortgage monthly. So you would need a significant amount of extra money outside of that to pay back the heloc or any personal loan in addition to your mortgage. Why wouldn’t you just put that significant amount into the mortgage without taking out a heloc instead?
@E_Gfree 2 reasons, 1 is that the heloc allows you to make a bigger lump sum than you have at a given time so it works kind of like an advance in your paycheck. Second, because the heloc allows you to take money back out of the house if you have a bad month. Without the heloc you're locking your payments on the house up indefinitely.
@@E_Gfreesimply put its about paying down whatever the debt is and still having access to the money after it was used. The whole point of velocity banking is being liquid and recycling the same dollar
Your first scenario is not even velocity banking. 🙄 You can’t pay loans or credit cards (unless it’s a balance transfer) with a credit card. They specifically tell you to leave the amount of loan and credit card payments in your bank account to cover those payments. Calculate your monthly expenses, excluding mortgage and loans (e.g., groceries, gas, utilities, healthcare, hygiene items, etc). Then make a payment in the amount of your monthly expenses and cash flow to the credit card you’re looking to pay off first. This payment will cover the minimum payment and reduce the balance and ultimately the amount of interest being paid.
I'm trying to figure out how the balance ever goes down in the credit card scenario if you're just putting all your expenses on the card, and making roughly the equivalent amount payment 🤔
So what is the interest on the 500000 ? What is the interest on the 490000. On the credit card you put you expenses plus your cash flow. The credit card interest charge goes down . I just did it and paid my own off in 6 months. If I had just used my cash flow in it would have beennnine months. Credit score goes up.. miles increase. I did not have to give up anything to do this. Now I am adding my extra to savings
In the version I saw, It spoke to having a HELOC as a mortgage. So instead of having a mortgage plus a HELOC, you have one account in which you pay bills from. Instead of using your bank account to pay bills, you dump all your money into the HELOC, pay your bills with the HELOC, and you don't touch your surplus unless it's an emergency and you never pull out more than you put in. I would love to see an analysis of this. I can see why he's saying his examples don't work but I would love to see a 30 year mortgage vs a HELOC using this method. I wouldn't imagine, a 30 year mortgage, where you're paying mostly interest for 15 years is better than the first lien HELOC with velocity banking. I don't know if he's bias, makes money off traditional lending, or if he's only aware of a few methods that don't work but I would love to see what it looks like with the HELOC method I stated above.
LOL. I've seen this video before. I mentioned on it that there is no way a CC minimum payment of $1500 is $100. There are some other channels where they stress that using debt tools that have a lower interest, but it is crazy how many people support this stuff. I wouldn't call it a scam since it does get people to focus on their finances, which is better than doing nothing.
It depends on whether you're saving or borrowing. Compound interest is better for you if you're saving money in an account or being repaid for a loan. However, if you're borrowing money, you'll pay less over time with simple interest
Exactly- he let that out, and it’s supposed to be a huge amount- the very reason someone would pick velocity banking. Why wouldn’t he discuss this? What is Cornell teaching their students?
If you are wondering about the proclaimed huge savings in the VB videos: Those are kind of real, BUT they come from using the monthly extra cashflow (income - expenses) to cut down the mortgage instead of keeping it on a savings account, the LOC has nothing to do with that.
@@wackykids not much I can tell you. It is located in Ithaca, NY the deepest blue far left area in NYS this guy is 110% Bidonomics thru and thru. This video does NOT hurt me cuz I see how fast ive already climbed out of debt using VB, its the damage hes causing so many who could use VB to rid themselves of debt
WRONG WRONG WRONG. 1. your $44 in savings at the 18:00 minute mark doesn't account for the massive savings than if you started from $500k vs $490k mortgage. 2. In that same example, see how in month 5, your HELOC balance is zero???? You can now RESTART THE PROCESS and accelerate the loan pay-off, while paying less in interest. Show that, and you'll be converted. This didn't make sense to me until I realized that it was because the revolving $10,000 payment is front-loading the principal and thus the interest savings are huge. AND, you end up paying much less overall with this method than simply adding that exact same payment every month. Not too good to be true, I've done the math!
It doesn’t, other than the longer you take to pay the balance, the longer you are incurring interest. Interest is charged each month on the then current balance. Pay faster, incur less interest and vice-versa.
What about just trying to pay down/off a higher interest credit card? Depositing what’s in your paycheck thats is used to pay bills that can be paid with a credit card to the said card with the intent of paying it down faster. Does that work? Asking for a friend.
So substituting a loan with a lower interest rate with credit at a higher interest rate cost more. Plus they charge you a heap of fees for using the card. Makes sense. I can’t understand how anyone thinks it is a good idea.
@@TheDaman1111 if you are carrying a balance longer than a month and hence accruing any interest charges on that CC as part of your strategy, then you are without a doubt paying more interest than you otherwise would.
@@raiden031 Temporarily... but if you are disciplined and pay it down quickly, then you save in the long run... you definitely pay less interest when you chunking it at the mortgage and knocking down huge chunks at a time. Then you have built in cashflow as you are taking care of the minimum payment by depositing your income
What I don’t get about velocity banking is the mortgage issue. If you are putting your entire paycheck into the heloc or loan, where are you getting the money for the actual mortgage you still have to pay monthly? The examples I’ve watched put your entire pay into the heloc.
The HELOC becomes the TOOL instead of your checking account. YOu pay all ongoing monthly expenses including mortgage, FROM the Heloc, instead of checking account. The goal is to keep the balance owed on the HELOC as low as possible during the month so the simple interest will be as low as possible expense for you. So my weekly paycheck is transferred right into it. I use a CC for all daily purchases and utilities, etc. Then I pay one CC invoice per month, from the HELOC. I have breathing room if an unexpected expense pops up, because the HELOC min. payment is always covered each time a paycheck is deposited into HELOC. Only using a $10k chunk at a time. Once it pays itself down after about 13 months, i take another $10k from HELOC and apply to my mortgage. Shaving off thousands in interest over life of loan, and reducing the timeline by years. THe cost of the Heloc interest incurred (simple interest) is significantly less and completely covered by the savings. Discipline is key, as is not living beyond your means. Budgeting must take into account those infrequent costly items like real estate taxes, gifts, car repair, new appliance, job loss, medical bill. Heloc, during a paydown, will allow for additional credit to become available..handy in an emergency! I have a $15K LOC, and only use $10K at a time. That leaves a $5k wiggle room. I have the discipline not to use it for "fun" or unnecessary spending. WOuld defeat the entire purpose. Also, abusing it would be putting my home in danger since one's home is collateral to ensure HELOC is paid back before the 10-year window of time. At some point the HELOC provider will no longer extend credit and you will just have to work to pay it down with interest and min. principal payments. That's why i stick with $10K at a time. Minimizes the impact of dealing with such an outcome.
Interest is front loaded. In your truck loan example if the interest in month 1 is merely $70 on a $644 payment, that truck is in its last year. Your example is deceptive. First 3 to 4 years interest in more than principle. You’re trying to keep people broke buster.
This is the velocity trap. The interest/principal you see on an amortization schedule fools you into thinking you are knocking out lots of interest and no principal. But if you simply deduct a chunk of the original loan amount and rerun over 30 years it's the same. What you guys are really seeing is how expensive 30 years is to repay. Taking a smaller loan or the same loan over a smaller duration will save you money - always. The key takeaway for everyone should be that using higher interest to pay lower interest is always a bad idea.
@@MatthewMoeller not in my case or most others using VB correctly. The balances on the high interest isnt being carried for long at all so the amount in interest savings in tens or even hundreds of thousands
It isn't. The math has been detailed in numerous videos. If you try to leverage expensive debt to pay off cheap debt you WILL lose money over simply paying your excess cash straight to the loan.@@tamorazana
@@MatthewMoeller the reason people choose 30 years and not shorter years is the monthly payment is affordable. No one is looking at the interest until you get introduced to getting out of debt. But interest isn’t just about which number is lower. It’s about how much of the payment you are making going towards interest. Now calculate that percentage and now you will know which interest rate is better
You were very thorough on listing your illustrious accomplishments (Cornell MBA, etc., etc.) and qualifications as to why YOU are an EXPERT qualified to debunk Velocity Banking. Yet despite your loquacity and absolutely wonderful charts, it seems you conveniently left out a couple of KEY talking points regarding the USE of open lines of credit and the differences of interest used/calculated on Mortgages, HELOC's and LOC's. 💥Compounding interest...and...Simple interest💥 being the most egregious omissions. I can't decide if you left this **MAJOR** point out in order to purposely deceive viewers (kind of like watching a magician employing sleight of hand🤣) or if you simply and truly do not understand the VB concept...as Cornell wouldn't dare teach such a concept!🤣 Nonetheless, both you and I know for CERTAIN that it's the **INTEREST** that KEEPS a person in DEBT, **NOT** the monthly payment of the debt.
Compound interest vs. Simple interest effectively makes no difference, although velocity banking people talk about it like it is "HUGE!!!!". I calculated the interest correctly in the examples in the video, and the example shows this person would be better off (meaning, they would pay less) by just paying down the loan directly and not bothering with the VB stuff. The example that I analyzed in the video was originally used by one prominent VB channel, and I proved her math was wrong. And a different prominent VB channel fact-checked me only to admit that I was correct... see link here to a video that he did about me, and see also his pinned comment admitting I was right. ua-cam.com/video/VsCt0LruiRk/v-deo.htmlsi=Kj4a-i3qoWyC90MD
Compound interest vs Simple interest effectively makes no difference??? Really? 😂 Let me also point out that your case review of one of CV's videos was flawed from the start. In her video, she clearly stated that the individual in HER case study would use CONVENIENCE CHECKS to "transfer" debt, NOT using a cash advance to pay debt, as YOU stated in your video. Was this little oversight AGAIN the work of a Cornell-trained magician intent on deception? Because from that moment on, your numbers failed you and were absolutely wrong. They were based on YOUR "version" of her case study and not on the actual facts clearly stated in her video. ***Regarding Compounding interest vs Simple interest, could you please enlighten me and my fellow non-Cornell-MBA plebs with an in-depth explanation on how there is "effectively no difference" between the two?*** As the great Ted Knight stated in the hilarious classic, Caddy Shack: "Wellllllllll???...We're waiting!!"
Lies Lies Lies, Yeah! Denzel did NOT say that you were correct. What you actually did was CHANGE what CV said regarding CONVENIENCE CHECKS...You did your numbers work based on CASH ADVANCE numbers NOT CONVENIENCE (no fees) CHECKS...making your numbers ALL wrong. You seem like a banker shill more than anything else.@@TheWilliamLeeShow
@@TheWilliamLeeShow -- his video actually shows everyone's math was wrong, but you were the closest on interest. Until he pointed out where you place the PLOC affects the calculations.
Mortgages are simple interest. Credit cards are compounding interest because they can charge interest on the interest. You can Google and UA-cam this to confirm. Also, there is no such thing as amortized interest, you’ll hear that term in VB videos.
They justify velocity banking off of the idea that the money you pay will be revolving. But, if you already have a PLOC or HELOC then you have access to that credit line if you need it. You can borrow on it at any time.
Thank you for sharing. I've watched several of the videos in support of velocity banking and i couldn't wrap my head around how it could be faster than just paying extra payments. Even when i use an early payoff calculator and plug in an extra monthly payment of $500 vs an annual lump payment of $6,000, the monthly payment comes out ahead. So then i ask, how could you save more by paying in chunks AND paying an extra interest payment for the heloc, when even without the heloc, paying in chunks doesnt save more in interest? Why are so many people convinced velocity banking is better? It's also way more risky and people would have to be very careful not to overspend or even worse lose their heloc after depositing their paycheck into it.
I did not watch this because using a cc to rearrange you debt IS faulty. However a secured line of credit IS the way to go. 3% percent interest (only) works for me. Before i had $1500 of minimum cc payments. Using the line credit to pay the 30k of cc debt freed up $1500. Meaning that rearrangement added $600 to my bottom line monthly. Instead of being in YEARS of debt i am only in a few months of debt. The Key is creating a BUDGET and sticking with it. It will be hard for about 6 months. That beats years of struggle.
In the first scenario, seems you'd save 200$ in interest putting it all into the CC. Total Interest from truck,cc,loan : 1341 Total Interest from using CC: 1141
Right off the top though this guy is mixing up the mortgage and HELOC scenario. You dont transfer the mortgage into the HELOC, its using the HELOC to chunk an amount over off of the mortgage.
I really miss Louis Rukeyser and similar type shows. The video was much like those award-winning shows. I know my friends are using the velocity banking process; but they rarely have any money to save each month. I know I can’t convince them that they are not making headway on wealth accumulation, but I enjoyed the video.
"Hello! As a foreign woman who moved to the USA two years ago with my daughter, navigating life as a single mom has been challenging, especially living paycheck to paycheck. Your channel has been a lifeline for me with your clear and thorough explanations. I'm genuinely grateful to have found your content and even more so that you offer it for free. Thank you for your generosity in sharing such valuable information without asking for anything in return."❤ Thank again
Would the velocity banking example for loans work if you were to use 0% Intro APR credit cards? In other words, it doesn't work when APR is higher, but if the APR is lower or you can use some other credit card benefit like a big sign-up bonus it could work out better?
Listening to the videos it almost sounded like a cult. Are there some instances that the concept would work? If your HELOC was equal to or 1% lower as it's simple vs compound interest? What about getting a new 0% APR 18 month intro card and as long as you paid that off before the interest hit you'd save a bit, especially if you had a method of paying things that got 1-2x points per dollar on the card?
Simple vs. compound interest is another obfuscation thrown in by the VBers, along with saying the interest on a mortgage is "front loaded." Mortgage interest each month is based on the monthly balance. It is simple interest. It is only front loaded in the sense that you have a higher balance earlier in the mortgage. The 0% card could work, but think about it....would the banks offer 0% if most people had the discipline to pay it off?
@@Matt-nx4wthat would make sense if I made extra principle payments and my monthly payment went down but it doesn't. Mortgages don't recast every month. L.O.C.s recast daily. When talking about borrowing money, time and principle are the biggest enemies. There is no time machine so the best thing to do is attack the principle. When you change the nature of the loan from amortized to simple and you have a much smaller monthly "interest only" payment, a much larger chunk is paying off principle.
It could work if the interest is lower. Or with a slightly higher interest rate in case your contract does not allow for monthly extra payments but maybe just once every year / every few years. In conclusion, the only things that really help are: 1) lower interest rates 2) more monthly savings 3) being able to apply extra money to your debt ASAP (while keeping an emergency fund) In the VB videos for the LOC scenarios they use the massive gains from 2) and 3) for the mortgage to hide the fact that the LOC does not help you at all (it slightly improves how fast your money can be applied to your overall debt but that is offset by its higher interest rate).
@@zilvarro5766 I'm kinda confused how it's offset when the payoff on my home in particular would be 7 years and change with a VB strategy while my current mortgage is obviously 30. Nothing changed, just where my money went.
I just started velocity banking And I’m still studying every which way to learn more. My first month I was able to pay off two credit card balances? I don’t know how that happened but I ended up having money to pay all my bills and advance on paying off debt. Sure you will pay a little bit of interest but it beats paying the bank in overdraft fee which I’ve done on countless times. Velocity banking also how’s allowed me to have the money or the ability to pay my bills without fear of not having the finances to pay them with. The biggest key to anyone is you have to be consistent and always put what you will need into your source of payments whether a Credit card or a HELOC however you are receiving the finances make sure that your funds are always there otherwise the velocity banking will not work.
So is it my imagination when i run the math on a loan i have for 4 years vs payimg it in 13 months with Velocity banking method ?? Or is the calculator not telling me the truth ?? Its just math...
Velocity banking helped me pay off my house quickly. How? I found out very quickly it sucked after I was tied up in a HELOC that was financially worse than my mortgage. Since i was tied up in it, i had no choice but to pay it off as quickly as possible. So i tightened my belt up and threw every dollar I had to pay it off. I’m not sure I would've had the discipline to be so aggressive if I would’ve stayed in my safe conventional loan. Im so grateful for the horrible advice on getting a HELOC, putting me in a bad situation, and forcing my hand.
Great, glad to hear you checked the math. Now do the same thing but just assume you put the same amount of extra money straight into the loans instead of doing it with a Velocity Banking strategy. If - using Velocity Banking - you're using another loan with a lower interest rate than the loan you're trying to pay off, then VB might work for you. But if the loan has the same interest rate or a higher rate, then it probably will not work for you and you'd be better off just paying your extra cash directly into the loan.
@@TheWilliamLeeShowwhat about the min payment your not paying on the with the second loan? That payment or lack of payment gives your extra spending power each month.
Sir you are missing the fact that vb free up cash flow which is one of the primary points of vb. Since a simple interest cc payment is satisfied through paying your check onto the credit card-it frees up that minimum payment and then lowers the average daily balance.
It's not that it doesn't work it's just that it works on psychology rather than math. You see velocity banking is designed to change the emotional impact of carrying a balance by making all scales equal. With ordinary finance your paycheck feels like a windfall and so it's very easy to spend spend spend and not have enough left over and you're forced to charge charge charge to make up the difference in bad spending habits. If you start from the assumption of someone who has horrible financial habits when they switch to velocity banking it works amazing because now there's no windfall but only massive debt staring them in the face so they feel the emotional impact of being scant broke and deeply in debt so now they're highly motivated to pay off that debt.
That's the best breakdown I have seen. Bottom line is, it doesn't work on the math side. But I also contend that if you are able to make yourself go through all these gyrations successfully and follow the plan, then you should be able to do it the conventional way. A spendthrift is not going to care either way, and it will fail.
Thanks for this video. I stumbled across this velocity banking concept on UA-cam a few weeks back and ran the numbers the same way you did. There’s surprisingly many videos out there on VB but very few of them actually compare just taking the extra cash flow and making extra payments.
My qualifications are only to tell the audience that I know how to do financial math, and probably better than most people. The thing that matters is the math itself, which proved that Velocity Banking - in the scenario I was evaluating in the video - is NOT the optimal way to go. Simply hoping/believing otherwise is not a good choice..... do the math, and trust the math. Finance is math.
@@TheWilliamLeeShow Finaly you just made a statement that is true and accurate thank you. I feel you may have picked a bad video to disprove VB on. Makes me wonder if you searched for the perfect video to debunk VB?
@@TheWilliamLeeShow I apologize but I also many degrees and used and 9% APR HELOC to pay down my 2.25% Mortgage because the payment were roughly $1500, $700 to principle and $800 to interest at the 4 year mark so that was annualized a over a 1000% APR. Time was my enemy and saving $20k to pay down in chunks was much slower than leveraging an LOC. So the LOC allowed me to leverage money at 9% APR which was wildly less expensive. What your saying has merit if leverage wasn't a FASTER vehicle like it was for me. Anyway it allowed me to pay off a 30 year mortgage starting at the 4 year mark in a total of 8.5 years. And yes I cycled my whole income through the HELOC to reduce monthly interest and used extra money to pay down the LOC. Not magic just massive savings on interest.
There is no compounding on a loan…unless it is a negative amortization. Compounding refers to paying interest (or more commonly dividends) on a growing balance. If your loan balance is going down, there is nothing to compound.
@@SFXD24paying of the truck, credit card, and loan off gives you $1,028 in cashflow. Since the paycheck is paid into the credit card, you have no payment on the credit card.
VB worked for me too. Read about it years ago and didn’t start it until last year. Had 3 years and 3 months left on car loan. Paid off in 3 Months! Yes it can work for some people.
There are benefits to Velocity Banking: lowering interest, lowering balance, credit going up, increases coming in. If you don't like it, don't ruin it for everyone else. I'm personally using more than one strategy to attack my debts. Each one has it's own benefits. A multi prong approach is best.
You are doing the process all wrong sir. The checking account and the line of credit are linked at your financial institution so there are no transfer fees and no over draft fees. To use velocity banking correctly your checking account should always be on zero.
Shaky? Hum-what does that mean exactly? Read Becoming Your Own Banker by R Nelson Nash. You have to use participating whole life for it to work exactly how it is supposed to. However, some people use an IUL which is not the instrument that was made for IBC. I have one ( Insurance for 8 years MBA etc etc blah blah.)
Thanks for explaining it so clearly. The math simply ain’t mathing. Just doing extra payments on the mortgage will make you achieve the exact same thing, but without the fluctuating intereste scare you need to live with. Only scenario in which VB could work is if the heloc rate is lower than your mortgage rate, which generally is not the case.
so not true. you do not need a lower rate at all. amortized interest vs daily simple interest. if you paycheck park at beginning of month and offload expenses to CC and pay CC in full at end of month, you reduce interest expense greatly and your effective interest rate on the heloc is lowered.
I was at first was skeptic about velocity banking because the person made a math mistake by not counting expenses in the last month. I setup a spreadsheet and went to town with multiple scenarios including a ploc at 24 percent. I would get out of debt in 8 years vs 20 years and save 50k in interest in the worst case. scenario. The trick is that the heloc amount must be paid in a year tops and you need good cashflow. But it works and it is disingenuous for you to flat out reject it. I agree it is not for everyone but it works. The trick is you pay your lowest balance first to increase cash flow.
He’s forgetting the cash flow. That 100 600 and 200 dollar payment turns into cash flow vs when you paid the first way you couldn’t use that cash. You lose money.
Hes right. Did the math to see if it would benefit us to pay our 30-year mortgage off early, however, we realize that by putting all of our cashflow into the balance helps us pay off our home in only 8 years without taking out a line of credit like with velocity banking suggest! With velocity banking, we could pay it off in 14 years (16 years early) but you still pay interest and just paying extra every month saves us more money and the balance will be paid off even sooner! Everyones situation is different. Velocity banking may not work for everyone and there could be better alternatives to paying off debt.
That doesn’t make sense. Could you explain it in mathematical terms by chance? How would you double the debt payoff time by paying off the same amount but using a heloc then paying that off ?
Analysis flawed. Doesnt take into account increase in positive cash flow from snowball payment method for higher interest debt cancellation elsewhere and not just the original mortgage.
This is the famous will I keep hearing about. Yea he took two extremes to try and drive home a point against VB, but in any topic one can find two outliers to propagate their assertion. VB works at least with a HELOC and a CC grace period to defer interest rate. But the most fundamental thing he forgot regarding the HELOC strategy is Liquidity! If u use your extra 2k cash flow straight into the mortgage you don’t get that 2k back, it’s gone period. But if you use 10k from the HELOC and pay down your mortgage and repay it down, you get access to the capital again and again! Hence the revolving credit line.
I didn't take two extremes. I took an actual example of "why velocity banking works" from a popular Velocity Banking channel and proved that it actually did not work in that situation..... meaning that what worked better than VB was to simply pay the extra available cash directly into the mortgage. Also, I didn't forget about liquidity. To maintain access to liquidity, all you need to do (if you qualify) is get a HELOC and then don't use it! Pay off your mortgage directly instead of the VB nonsense, and if you need liquidity, then you can draw on the HELOC. Critics to my videos say I forgot about this or that, but 100% of the time they were incorrect in their critiques - I did not forget, they simply misunderstood.
Thank you for this side of the story...Velocity may work, since you are overpaying on your credit card, not using cash advance...I agree about the Heloc, unless a lower rate-it does not make sense.
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VB worked for me. Maybe you should say that it may not work for every scenario.
Exactly
Did u run the numbers to see if it was the better method?
And body builders can get really big doing their exercises inefficiently. Just because something works doesn't mean it's the best way to do it.
Amen! Worked for me at a tune of $68,000 in interest savings.
sounds like his video is bias!
It's all about the difference between "amortized interest and simple interest" which I don't think you explained here.
He is also not mentioning the cash flow from eliminating the debts. So the $644, $100 and $284 a month they had in payments to these 3 debts actually gets moved to their cashflow. That money, moving to a revolving account, can be used again if an emergency arises, instead of just being thrown at the debt and that’s it, you can’t use it anymore.
But you should have an emergency fund for that 3 months of expenses or more
So the previous money for the 3 payments goes towards cashflow or a revolving account. It surely can't be both, right?
Yeah, he's definitely not doing it right.
Don't blindly trust people when they throw out titles and credentials. Learn it and do the calculations yourself.
@@ryebread447living like King Tut with 3 months of expenses saved up? You're not living in reality and need to come back down to earth bro
@@ryebread447why do you need an emergency funds if you can have low interest credit cards or lines of credit? That advice is so old. It was valuable before credit cards. Today you can pay anything with a credit card.
Velocity Banking actually is not just using a higher debt weapon to pay down your debts. The part that you forget to mention which is the greatest piece of Velocity Banking is that you create more cash flow than your original cash flow and this is where the magic is at. The second benefit would be that you would have money available to you if something comes up because if you put all your cash flow into a mortgage you will not be able to use that money again. Thank you for showing how Velocity Banking works
Well, if you make extra payments towards your debt principal amount while keeping the line of credit open 9n the side with zero balance for a rainy day, you cut down your debt faster while having the comfort of available line 9f credit in emergencies.
If you didn't had to use line of credit for emergency and debt is paid off faster, you win. But If you had emergency you have zero balance line of credit to fall back on so extra payments towards the loan cannot be reused argument doesn't apply.
Keeping it simple while cutting the debt faster should be the goal.
Why arrive at destination via scenic route when highways exist for simpler yet similar outcome.
@@user-wy2ud4xx5q lol that is exactly what Velocity Banking is. You are the one creating a problem for yourself when your raining day comes. Now you have another payment and now you have to worry about what the amount will be going on that extra principal payment. See the problem that most people fall prey to is segregated income. But with Velocity Banking you will never fall prey to this trap! So you right keep life simple by having all your income moving in one direction.
@@user-wy2ud4xx5qif you use the line of credit as an emergency, you would create a payment due for that line! In the example above, you would be at a negative cashflow! VB gives you cashflow throughout the entire process.
There is no interest the credit card is paid off during the grace period each month!
Exactly, who is this guy? Can't believe he missed so many things.
In your example where you consolidated all the balances into a credit card, you still subtracted only $1028 monthly. What happened to the extra money leftover from not making the monthly payments from the truck, credit cards that are now paid off? Did you assume it was spent elsewhere?
This guy on the video should be embarrassed
There is no additional money in his example. The three payments prior to consolidation total $1,028 a month.
644+100+284=1,028
@@shawnhandley548 Oh my goodness gracious. This guys shouldn't be embarrassed. Maybe rewatch the video and add up the three payments prior to the consolidation.
@@heatherm2428the 1028 is supposed to be available cash flow …. They shouldn’t be separated out
@heatherm2428 Also … with velocity banking when you make payments, you make that money available to you … you’re making extra payments but not breaking the bank … not sure how he or you are so confused
Can you show the annual 10k to a mortgage to see any savings? If there is a 500k mortgage loan at 7.35% and 10k is placed on it annually from a HELOC it should be paid down in 17 years meaning the HELOC cost s 10,267 per year x 17 years or $174,539 while the mortgage is paid down saving $370,128 or a difference of almost 200k in interest savings by paying it off in 17 years vs 30
I'm not trying to be for or against either argument but you didn't take into account some money. You just reallocated the money used for the loans and not their total money allocated to loans + rest of their income. So it isn't an apples to apples comparison to see if you would of saved money if you ignore their other money.
Wrong you don't take out money with cash advance. You put money into a credit card before one of your bills are due like electric bill propane bill etc. Once that money clears that you have put into your credit card then you pay your electric bill propane bill etc. It satisfies your monthly payment and freeze up that payment to put towards another that you're trying to pay down.
Right off the bat. No one promoting velocity banking is suggesting getting a cash back loan from a credit card. Or at least not anyone reputable.
Correct. Because none are reputable.
Thank you for this video. It makes more sense than the other videos recommended to me.
He’s lying it does work because yearly rates are calculated differently
Mr. MBA.... your degree eludes you... because you have the concept of how can a higher APR pay off a lower APR efficiently, and this you left out key components of what makes velocity work. However in scenario three your math proves it even though you neglected said key components. Also dont neglect the the 44 dollar savings (11 a month) compounded over 360 months at even just 5% interest. Almost 10k. And that's with ley components missing. I was looking for holes in velocity banking because I'm researching... but Mr.MBA you have done a disservice
What about including 0% interest first thirty day credit cards. Also cash back and rewards benefits?
It’s excellent for if you have no “cash flow” and you can use one of your credit cards as the velocity instrument. That immediate cash flow gets you back in the black with a little a breathing room. Once you get that one paid off, you can use one of the more conservative methods to pay down your debt.
But how does this help? Even the highest rate mortgages pale in comparison to average credit card interest. You’re doubling your interest for what end?
Thank you for the video but I am still confused. Most of the velocity banking shows a 10k heloc and to take a 10k chunk from the mortgage, pay down the HELOC with monthly checks and then do it again annually to reduce the amortized mortgage interest. Your example at 14:45 shows a transfer of the entire loan from the HELOC to the mortgage
I think how velocity banking works is amazing. I think it reaps larger benefits when you are able to pay down larger balances more quickly by increasing your cash flow. Paying off a 30k car in 24 months is way better than 60 or 72. It also frees up cash if needed for those living pay check to pay check.
But Heloc’s DON’T have a higher interest rate the a mortgage! Read your disclosures and amortization charts! You are paying a massive amount of interest and will often pay twice what you borrowed.
Depends on the market. HELOCs are adjustable rate. My mortgage rate is 4%, and my HELOC is at 8.5.
I ran a simulation to where the HELOC needs to be less than twice the rate of my mortgage to work to my benefit.
@@russellhaskett6830 Read your mortgage disclosure again. You are very wrong about your rate.
@@russellhaskett6830faulty thinking. Heloc uses simple interest. Mortgage is amortized. If you look at your mortgage’s amortization schedule then you will see that you’re paying 2x times the purchase price over the life of the 30 yr mortgage. Your mortgage’s APR isn’t your actual interest rate. By following VB, you pay your income into the heloc, lowering your avg daily balance, and lowering your interest/payment due. Cashflow (and spending discipline) is the key to VB success.
@@russellhaskett6830you should look at the difference between amortized interest and simple interest.
I'm always willing to listen to both sides of the house on any subject, credentials don't mean shit anymore, your exactly correct math don't lie! I think your case would have been better made if you did a react video to one of the VB influencer's videos, breaking down their example and why it would not work. Your case here was kind of weak and difficult to follow along. This is just my observation and reading through most of the comments.
says the guy with no credentials...
Yup .!.@JackAndTheBeanstalkr
@@JackAndTheBeanstalkrappeal to authority fallacy much?
@@justincoffman4508 better than the appeal to stupidity
A fair statement. I agree with you.
No one Ive seen in velocity banking is talking about using a 21% interest credit card. Theyre talking about using a heloc and peloc at 9% interest. Additionally if you can payoff your loans in 13 months with no cashflow velocity banking isnt for you.
Good luck finding a personal line of credit at 9%, try 12 or more.
I did my case with a 4 percent mortgage and a 24 percent heloc and it worked. Buy you have to kill your lower debts first.
"Just deposit your extra money into the mortgage" -- is exactly why you don't get the VB idea. It's not about saving money but having more cash-flow at a marginal cost. I could see it being very useful for people. Not having cash-flow can be horrible and expensive... For example, the gas is out because you miss a 35 dollar payment, the Gas Co. can't come and turn it on for a week.... and then they charge you 100 reconnect fee.
No cash-flow cost money and destroys your quality of life. With the VB method, a few months in you can have more breathing room. And maybe get there faster?
(I haven't tried it though, but that seems to be the draw.)
Yeah that’s exactly what it is without doing silly maths.
I am confused. He has all of these degrees and experience and I believe his calculations are wrong on the 1st example. His math ain't mathing!
He says the truck loan would be paid off in 12 months, that seems reasonable based on the payments/interest and balanced owed. However, the math ain't mathing for the loan or the credit card!
The CC with a $1500 balance and $100 monthly payment would not take 13 months to pay off. By simply math, not accounting for the 21% interest rate, it would take 15 months to pay off (that is simple math of 1500/100). Further, there is that interest rate he fails to calculate for, which adds about $26 a month in interest. This bring the $100 paymemt down to $74 a month. I would say this credit card will be paid off in 21 months. He states the loan with a $3500 balance and a monthly payment of $284 will be paid off in 13 months. He is a little closer on this one but still off. I calculate that after accounting for the monthly interest of 28%, this loan it should be paid off in 17 months.
So, based on simple math and his examples the CC and the loan being paid off in 14 months through VB will save this person the monthly interest payments they would pay to the CC and loan beyond 14 months.
Most people who do VB will secure a PLOC or HELOC with a much lower interest rate and the ability to transfer money to loans or CC without a 4-5% balance transfer fee from a CC.
Another thing he fails to mention is why do these people who promote VB promote it? They don't get any kick back from someone going and securing their own PLOC through their personal bank. They don't get a kick back from the CCs or loans from being paid off early due to VB. What would be their motive for pushing this payment method over maybe snowball or avalanche debt payoff methods? There simply isn't any benefit to these people pushing VB other than helping people get out of debt quicker.
But maybe I am just confused! I stopped listening after the 1st example.
I ran my numbers in a couple of spreadsheet as well. I could see that with velocity banking (HELOC) I'd be able to pay down my remaining mortgage balance early, but not earlier than by making extra payments. My takeaway was that using the HELOC only provided the flexibility of having access to extra cash for an unbudgeted expense - at the cost of less money going toward the mortgage. The same is the case with making extra payments, but an unexpected expense would either have to be covered by credit, tapping into an emergency fund or reducing future additional principal payments until said expense is covered. Either way, velocity banking turned out to be a moderately higher interest version of what I can already do without a HELOC.
This. Have an e fund first. Pay ahead out of your surplus. Get out and stay out of debt.
@@24_Delta HELOC also has fees to set up and create... The people shilling this velocity banking want to make money off of setting up this stupid method.
If you ever did get into a place where you needed money you could take out a loan on your house equity
You could just have the HELOC and only use it for emergencies. The ones I have looked at don’t have any fees and usually beat a credit card interest rate.
I accept your apology for bursting my bubble in thinking that velocity would work, Haha! You're right, mathematically it doesn't work out. After seeing all the positive comments towards velocity banking in other people's videos, it seems the benefit of velocity banking is the "positive emotions" derived from thinking that you're actually beating the system. I guess that's better than feeling miserable, right. Thanks for your video!
I think you nailed it! The benefit of VB is positive emotion from thinking you're doing something that works. Sure, it "works" in the sense that they're paying down debt, but it doesn't work in the sense that it's an inferior strategy to simply paying off a loan directly!
Your first mistake is believing bots and idiots making comments
It does work because yearly interest rates are calculated differently
@@juandeleon1665 tell me you don't know what you're talking about without telling me...
@@xephael3485 do you have a mortgage if you do check your paperwork look at the fine print when you signed for a 4 percent interest rate it’s really more like 60% percent interest rate throughout the whole 30 year loan I know what I’m talking about if you don’t educate yourself
The Velocity Banking process w/ a HELOC can actually work, provided that the HELOC has a lower rate than the mortgage. You're assuming in this video that the HELOC has no limit, and that the interest rate is higher than the mortgage itself. Something also to take into consideration is that the HELOC compounds daily, while the mortgage compounds monthly. Additionally, when you withdraw from the HELOC, you generally have a minimum amount you can take out (in my case, that is $5000 with the particular CU that I use). Also depends on the type of HELOC you get. (Mine's a 5/10 at a fixed rate 2 points lower than my mortgage(s)). So, in this case, Velocity banking mathematically works if you are dumping a mortgage onto the HELOC in chunks, or as a whole.
Thanks for sharing this video though! Very helpful to see different sides. **Everyone's situation is different.
No shit. If you get a lower rate....it's a lower rate. The VB didn't "work", you just got a lower interest loan to pay a higher interest loan.
Plus the mortgage rate is not the actual interest rate. Read your disclosure. Look at an amortization chart.
VB...The examples I've watched actually have a 10% heloc and a mortgage of 6.5%. And looks like it works
But why cant use your pay check to pay the loans direct...why need credit lines to pat it then swap pay check to credit line ? Whats the purpose of this ?!!
@holypunk12 of you pay money directly to loans the liquidity goes to money heaven. you need a line of credit for emergencies, since your socking away all you excess cash flow and savings into the loan. also a heloc is daily simple interest. so if you have decent cash flow and your chunk size is appropriate and you paycheck park at the beginning of the month and load as many expenses onto a CC and pay off the CC at the end of the month, then it ask works fine. a close 2nd, without the hassle, if your generally debt free and only have a mortgage is when you dump all your free cash flow reach month directly into mortgage principle pay down each month and have a heloc on the ready unused for emergency expenses, so you don't get screwed pushing all free cash flow into your mortgage note
The one scenario I think it can work is if you have a maxed put credit card like I did.
I can lower my daily balance by paying it down with a good portion of my paycheck each week. That will save interest. Then pay my bills with the card and earn 5% cash back which will offset more interest. And make sure to pay more down than I use it every month and try yo pay my bills towards the end of the month.
I should be able to offset interest two ways this way and pay it down with left over cash each month.
what credit card are you using that pays 5% cash back on everything?
I'd love to know as well. Discover only pays on rotating items
@@lancercool1992 I was mistaken. I have heard of it, but I don't have it.
I have one via PenFed
Pretty positive there is a Citi card with universal 4% CB
What you're forgetting to factor in is that not only will you be paying less interest on your home loan, it's a smaller amount being taxed in the HELOC for a shorter period and as simple interest.
What?? Kind of hard to follow tbh. Car loan showed vb 11(OK, 11 mos plus 1 mo for the small balance) months paid vs 14 mos leaving as is and pay more monthly with extra cash flow. How would leaving the loan as is and put more towards it for a 14 month payoff be BETTER than the vb payoff of 12 months?
Youre missing a few details. Cash flow positivity is key, you dont get a 2nd lien HELOC, you get a 1st. Principle and time are your biggest enemies. The interest rate on a heloc only determines your payment that day.
A HELOC is a second, the mortgage is in first position.
@@tommyj1116 not every HELOC is second, which is my point. They're not nearly as efficient in the second lien because, as you correctly stated, you still have your mortgage payment. A 1st position HELOC take the place of the mortgage.
I just heard about velocity banking today and I math just wasn't working for me...I just couldn't see how it was paying it off any quicker assuming you're actually accounting for interest and balance transfer fees on the credit card you're moving the debt it.
Sorry but it has been working for us like a charm
I used this to pay down my debt super fast. It is in no way a scam; however, for people who have a spending problem and cannot control their spending and live on a budget, this could be bad.
You would have paid it off even faster if you had just put the extra money towards the mortgage.
@@darkdudironaji didn't have a mortgage
@@therealtred4971 then what did you use to buy your property? If you're taking on debt for property it's generally a mortgage or a private loan from rich family
I feel like it works it the credit apr is low and you actually have savings
@@junglebunny7061 when have you ever seen a credit card 💳 with low APR
My issue with the first scenario is that I haven’t seen (personally) anybody saying to use high interest credit cards for velocity banking. I see people doing balance transfers to zero credit CC’s for anywhere from 12-18 months. I get these offers in the mail constantly: 4% balance transfer and then zero interest for 15 months, just got an offer yesterday in the mail. I could see that working for any high interest balances.
It reminds me of an Amway rally I went to years ago. They all got up to show " Their plan" they were all the same, but with their personal story.
I went because a relation was interested.
The reps were their own best customer for product. It was about getting others into the system.
Velocity banking does work, it is dependent on the extra money you have available per month. It worked for me and it should work for majority of the people.
Thank you. I'm sick of naysayers. Your credit score also goes up, something that doesn't happen when a credit union account is used.
Try this: if you have extra money available, just make the extra payment on the mortgage. If you do the math, it would work out to the same.
You won’t have the mess and fees to open a heloc + no risk of increasing rates.
@@graecisumIn VB term the extra cash flow is called cash-flow. Now if you have multiple maxed out CC, car loans, a mortgage, medical bills How do you throw extra cash at them in the most efficient way? That’s where VB is useful because it brings methods to madness. Without VB traditional financial systems have been failing people. Why not try something different? It’s not a scam. Either it works or does not. Cancer treatment is not a scam because the patient died….
whats the best approach if I have 80k in credit card cards and $120k in equity in my home. my plan was to pay off all the debt and add 3/4 of the savings monthly from paying off the debt as an extra payment to my principal mortgage after the refinance. ?? thanks
There's a ton wrong with this video. The premise of VB is that you do have a pretty big margin in your personal budget to apply to your debt. No one advocates that you put a balance on a heloc and leave it outstanding with no payments for 30 years. Ridiculous.
He also never said this in the video. He’s advocating just taking that margin and applying it to your mortgage directly. What this video made me realize is that velocity banking assumes the minimum payment is the only option until you magically take out a HELOC.
@@WMDistraction But a person can't comfortably make massive payments to the mortgage for fear of not being able to get it back out. The heloc solves that problem.
@@AnonymousPerson488how? You still have to pay the mortgage monthly. So you would need a significant amount of extra money outside of that to pay back the heloc or any personal loan in addition to your mortgage. Why wouldn’t you just put that significant amount into the mortgage without taking out a heloc instead?
@E_Gfree 2 reasons, 1 is that the heloc allows you to make a bigger lump sum than you have at a given time so it works kind of like an advance in your paycheck. Second, because the heloc allows you to take money back out of the house if you have a bad month. Without the heloc you're locking your payments on the house up indefinitely.
@@E_Gfreesimply put its about paying down whatever the debt is and still having access to the money after it was used. The whole point of velocity banking is being liquid and recycling the same dollar
Prove the Kwak Brothers HELOC method wrong? I'm considering it, and looking for where the flaws are.
Thank you for the information. Great job of explaining how it really works
Hi Will - Please upload the example spreadsheet
Your first scenario is not even velocity banking. 🙄 You can’t pay loans or credit cards (unless it’s a balance transfer) with a credit card. They specifically tell you to leave the amount of loan and credit card payments in your bank account to cover those payments. Calculate your monthly expenses, excluding mortgage and loans (e.g., groceries, gas, utilities, healthcare, hygiene items, etc). Then make a payment in the amount of your monthly expenses and cash flow to the credit card you’re looking to pay off first. This payment will cover the minimum payment and reduce the balance and ultimately the amount of interest being paid.
I'm trying to figure out how the balance ever goes down in the credit card scenario if you're just putting all your expenses on the card, and making roughly the equivalent amount payment 🤔
So what is the interest on the 500000 ? What is the interest on the 490000. On the credit card you put you expenses plus your cash flow. The credit card interest charge goes down . I just did it and paid my own off in 6 months. If I had just used my cash flow in it would have beennnine months. Credit score goes up.. miles increase. I did not have to give up anything to do this. Now I am adding my extra to savings
I changed my credit card bill pmt due
Mid month
@@mgordon1360Makes no difference, it’s still once per month. Plus or minus a week or two is irrelevant.
In the version I saw, It spoke to having a HELOC as a mortgage. So instead of having a mortgage plus a HELOC, you have one account in which you pay bills from. Instead of using your bank account to pay bills, you dump all your money into the HELOC, pay your bills with the HELOC, and you don't touch your surplus unless it's an emergency and you never pull out more than you put in. I would love to see an analysis of this. I can see why he's saying his examples don't work but I would love to see a 30 year mortgage vs a HELOC using this method. I wouldn't imagine, a 30 year mortgage, where you're paying mostly interest for 15 years is better than the first lien HELOC with velocity banking.
I don't know if he's bias, makes money off traditional lending, or if he's only aware of a few methods that don't work but I would love to see what it looks like with the HELOC method I stated above.
LOL. I've seen this video before. I mentioned on it that there is no way a CC minimum payment of $1500 is $100. There are some other channels where they stress that using debt tools that have a lower interest, but it is crazy how many people support this stuff. I wouldn't call it a scam since it does get people to focus on their finances, which is better than doing nothing.
It depends on whether you're saving or borrowing. Compound interest is better for you if you're saving money in an account or being repaid for a loan. However, if you're borrowing money, you'll pay less over time with simple interest
That is correct. Thanks!
How much interest was saved between your different scenarios?
Exactly- he let that out, and it’s supposed to be a huge amount- the very reason someone would pick velocity banking. Why wouldn’t he discuss this? What is Cornell teaching their students?
If you are wondering about the proclaimed huge savings in the VB videos: Those are kind of real, BUT they come from using the monthly extra cashflow (income - expenses) to cut down the mortgage instead of keeping it on a savings account, the LOC has nothing to do with that.
@@wackykids not much I can tell you. It is located in Ithaca, NY the deepest blue far left area in NYS this guy is 110% Bidonomics thru and thru. This video does NOT hurt me cuz I see how fast ive already climbed out of debt using VB, its the damage hes causing so many who could use VB to rid themselves of debt
WRONG WRONG WRONG.
1. your $44 in savings at the 18:00 minute mark doesn't account for the massive savings than if you started from $500k vs $490k mortgage.
2. In that same example, see how in month 5, your HELOC balance is zero???? You can now RESTART THE PROCESS and accelerate the loan pay-off, while paying less in interest. Show that, and you'll be converted.
This didn't make sense to me until I realized that it was because the revolving $10,000 payment is front-loading the principal and thus the interest savings are huge. AND, you end up paying much less overall with this method than simply adding that exact same payment every month.
Not too good to be true, I've done the math!
How does the number of payments affect interest?
It doesn’t, other than the longer you take to pay the balance, the longer you are incurring interest. Interest is charged each month on the then current balance. Pay faster, incur less interest and vice-versa.
What about just trying to pay down/off a higher interest credit card? Depositing what’s in your paycheck thats is used to pay bills that can be paid with a credit card to the said card with the intent of paying it down faster. Does that work? Asking for a friend.
It depends on the timing of when the bills must be paid and when the cash payment is available to pay into the credit card. Every situation is unique.
Don’t put anything on the CC. Pay your bills and anything extra goes towards the card. Simple
So substituting a loan with a lower interest rate with credit at a higher interest rate cost more. Plus they charge you a heap of fees for using the card. Makes sense. I can’t understand how anyone thinks it is a good idea.
I agree, but a ton of people fall for it.
People think it works if they dont understand how interest accrues.
@raiden031 It does work. I use my credit card to do it and combine with cash flow with my CC rewards to further pay down my balance also
@@TheDaman1111 if you are carrying a balance longer than a month and hence accruing any interest charges on that CC as part of your strategy, then you are without a doubt paying more interest than you otherwise would.
@@raiden031 Temporarily... but if you are disciplined and pay it down quickly, then you save in the long run... you definitely pay less interest when you chunking it at the mortgage and knocking down huge chunks at a time. Then you have built in cashflow as you are taking care of the minimum payment by depositing your income
You make more sense than the gurus of Scamocity banking
What I don’t get about velocity banking is the mortgage issue. If you are putting your entire paycheck into the heloc or loan, where are you getting the money for the actual mortgage you still have to pay monthly? The examples I’ve watched put your entire pay into the heloc.
Don’t try to make sense of it, because it doesn’t.
The mortgage payment is still a part of your monthly budget, you are making an extra payment every couple of months.
The HELOC becomes the TOOL instead of your checking account. YOu pay all ongoing monthly expenses including mortgage, FROM the Heloc, instead of checking account. The goal is to keep the balance owed on the HELOC as low as possible during the month so the simple interest will be as low as possible expense for you. So my weekly paycheck is transferred right into it. I use a CC for all daily purchases and utilities, etc. Then I pay one CC invoice per month, from the HELOC. I have breathing room if an unexpected expense pops up, because the HELOC min. payment is always covered each time a paycheck is deposited into HELOC. Only using a $10k chunk at a time. Once it pays itself down after about 13 months, i take another $10k from HELOC and apply to my mortgage. Shaving off thousands in interest over life of loan, and reducing the timeline by years. THe cost of the Heloc interest incurred (simple interest) is significantly less and completely covered by the savings. Discipline is key, as is not living beyond your means. Budgeting must take into account those infrequent costly items like real estate taxes, gifts, car repair, new appliance, job loss, medical bill. Heloc, during a paydown, will allow for additional credit to become available..handy in an emergency! I have a $15K LOC, and only use $10K at a time. That leaves a $5k wiggle room. I have the discipline not to use it for "fun" or unnecessary spending. WOuld defeat the entire purpose. Also, abusing it would be putting my home in danger since one's home is collateral to ensure HELOC is paid back before the 10-year window of time. At some point the HELOC provider will no longer extend credit and you will just have to work to pay it down with interest and min. principal payments. That's why i stick with $10K at a time. Minimizes the impact of dealing with such an outcome.
Interest is front loaded. In your truck loan example if the interest in month 1 is merely $70 on a $644 payment, that truck is in its last year. Your example is deceptive. First 3 to 4 years interest in more than principle. You’re trying to keep people broke buster.
This is the velocity trap. The interest/principal you see on an amortization schedule fools you into thinking you are knocking out lots of interest and no principal. But if you simply deduct a chunk of the original loan amount and rerun over 30 years it's the same. What you guys are really seeing is how expensive 30 years is to repay. Taking a smaller loan or the same loan over a smaller duration will save you money - always.
The key takeaway for everyone should be that using higher interest to pay lower interest is always a bad idea.
@@MatthewMoeller not in my case or most others using VB correctly. The balances on the high interest isnt being carried for long at all so the amount in interest savings in tens or even hundreds of thousands
It isn't. The math has been detailed in numerous videos. If you try to leverage expensive debt to pay off cheap debt you WILL lose money over simply paying your excess cash straight to the loan.@@tamorazana
@@MatthewMoeller the reason people choose 30 years and not shorter years is the monthly payment is affordable. No one is looking at the interest until you get introduced to getting out of debt. But interest isn’t just about which number is lower. It’s about how much of the payment you are making going towards interest. Now calculate that percentage and now you will know which interest rate is better
Agreed the payment is suspiciously high unless this person is already making extra payments or the truck is in its last year.
You were very thorough on listing your illustrious accomplishments (Cornell MBA, etc., etc.) and qualifications as to why YOU are an EXPERT qualified to debunk Velocity Banking. Yet despite your loquacity and absolutely wonderful charts, it seems you conveniently left out a couple of KEY talking points regarding the USE of open lines of credit and the differences of interest used/calculated on Mortgages, HELOC's and LOC's. 💥Compounding interest...and...Simple interest💥 being the most egregious omissions. I can't decide if you left this **MAJOR** point out in order to purposely deceive viewers (kind of like watching a magician employing sleight of hand🤣) or if you simply and truly do not understand the VB concept...as Cornell wouldn't dare teach such a concept!🤣 Nonetheless, both you and I know for CERTAIN that it's the **INTEREST** that KEEPS a person in DEBT, **NOT** the monthly payment of the debt.
Compound interest vs. Simple interest effectively makes no difference, although velocity banking people talk about it like it is "HUGE!!!!". I calculated the interest correctly in the examples in the video, and the example shows this person would be better off (meaning, they would pay less) by just paying down the loan directly and not bothering with the VB stuff.
The example that I analyzed in the video was originally used by one prominent VB channel, and I proved her math was wrong. And a different prominent VB channel fact-checked me only to admit that I was correct... see link here to a video that he did about me, and see also his pinned comment admitting I was right. ua-cam.com/video/VsCt0LruiRk/v-deo.htmlsi=Kj4a-i3qoWyC90MD
Compound interest vs Simple interest effectively makes no difference??? Really? 😂 Let me also point out that your case review of one of CV's videos was flawed from the start. In her video, she clearly stated that the individual in HER case study would use CONVENIENCE CHECKS to "transfer" debt, NOT using a cash advance to pay debt, as YOU stated in your video. Was this little oversight AGAIN the work of a Cornell-trained magician intent on deception? Because from that moment on, your numbers failed you and were absolutely wrong. They were based on YOUR "version" of her case study and not on the actual facts clearly stated in her video. ***Regarding Compounding interest vs Simple interest, could you please enlighten me and my fellow non-Cornell-MBA plebs with an in-depth explanation on how there is "effectively no difference" between the two?*** As the great Ted Knight stated in the hilarious classic, Caddy Shack: "Wellllllllll???...We're waiting!!"
Lies Lies Lies, Yeah! Denzel did NOT say that you were correct. What you actually did was CHANGE what CV said regarding CONVENIENCE CHECKS...You did your numbers work based on CASH ADVANCE numbers NOT CONVENIENCE (no fees) CHECKS...making your numbers ALL wrong. You seem like a banker shill more than anything else.@@TheWilliamLeeShow
@@TheWilliamLeeShow -- his video actually shows everyone's math was wrong, but you were the closest on interest. Until he pointed out where you place the PLOC affects the calculations.
Mortgages are simple interest. Credit cards are compounding interest because they can charge interest on the interest. You can Google and UA-cam this to confirm.
Also, there is no such thing as amortized interest, you’ll hear that term in VB videos.
They justify velocity banking off of the idea that the money you pay will be revolving. But, if you already have a PLOC or HELOC then you have access to that credit line if you need it. You can borrow on it at any time.
Hence the very point of VB. This guy is incorrect
Thank you for sharing. I've watched several of the videos in support of velocity banking and i couldn't wrap my head around how it could be faster than just paying extra payments. Even when i use an early payoff calculator and plug in an extra monthly payment of $500 vs an annual lump payment of $6,000, the monthly payment comes out ahead. So then i ask, how could you save more by paying in chunks AND paying an extra interest payment for the heloc, when even without the heloc, paying in chunks doesnt save more in interest? Why are so many people convinced velocity banking is better? It's also way more risky and people would have to be very careful not to overspend or even worse lose their heloc after depositing their paycheck into it.
I did not watch this because using a cc to rearrange you debt IS faulty. However a secured line of credit IS the way to go.
3% percent interest (only) works for me. Before i had $1500 of minimum cc payments.
Using the line credit to pay the 30k of cc debt freed up $1500. Meaning that rearrangement added $600 to my bottom line monthly.
Instead of being in YEARS of debt i am only in a few months of debt.
The Key is creating a BUDGET and sticking with it. It will be hard for about 6 months. That beats years of struggle.
Sooooo, in another words, YOU ARE STILL IN THE MATRIX.
Hey mate add all the interest rates on all the different loans compared to the credit card.
You for real?
In the first scenario, seems you'd save 200$ in interest putting it all into the CC.
Total Interest from truck,cc,loan : 1341
Total Interest from using CC: 1141
You sir, are providing a valuable public service.
You may be too polite!
Right off the top though this guy is mixing up the mortgage and HELOC scenario. You dont transfer the mortgage into the HELOC, its using the HELOC to chunk an amount over off of the mortgage.
Looks like you didn't understand. That's exactly what I did.
I really miss Louis Rukeyser and similar type shows. The video was much like those award-winning shows. I know my friends are using the velocity banking process; but they rarely have any money to save each month. I know I can’t convince them that they are not making headway on wealth accumulation, but I enjoyed the video.
"Hello! As a foreign woman who moved to the USA two years ago with my daughter, navigating life as a single mom has been challenging, especially living paycheck to paycheck. Your channel has been a lifeline for me with your clear and thorough explanations. I'm genuinely grateful to have found your content and even more so that you offer it for free. Thank you for your generosity in sharing such valuable information without asking for anything in return."❤
Thank again
Would the velocity banking example for loans work if you were to use 0% Intro APR credit cards? In other words, it doesn't work when APR is higher, but if the APR is lower or you can use some other credit card benefit like a big sign-up bonus it could work out better?
Listening to the videos it almost sounded like a cult.
Are there some instances that the concept would work? If your HELOC was equal to or 1% lower as it's simple vs compound interest?
What about getting a new 0% APR 18 month intro card and as long as you paid that off before the interest hit you'd save a bit, especially if you had a method of paying things that got 1-2x points per dollar on the card?
Simple vs. compound interest is another obfuscation thrown in by the VBers, along with saying the interest on a mortgage is "front loaded." Mortgage interest each month is based on the monthly balance. It is simple interest. It is only front loaded in the sense that you have a higher balance earlier in the mortgage. The 0% card could work, but think about it....would the banks offer 0% if most people had the discipline to pay it off?
@@Matt-nx4wthat would make sense if I made extra principle payments and my monthly payment went down but it doesn't. Mortgages don't recast every month. L.O.C.s recast daily. When talking about borrowing money, time and principle are the biggest enemies. There is no time machine so the best thing to do is attack the principle. When you change the nature of the loan from amortized to simple and you have a much smaller monthly "interest only" payment, a much larger chunk is paying off principle.
It could work if the interest is lower. Or with a slightly higher interest rate in case your contract does not allow for monthly extra payments but maybe just once every year / every few years.
In conclusion, the only things that really help are:
1) lower interest rates
2) more monthly savings
3) being able to apply extra money to your debt ASAP (while keeping an emergency fund)
In the VB videos for the LOC scenarios they use the massive gains from 2) and 3) for the mortgage to hide the fact that the LOC does not help you at all (it slightly improves how fast your money can be applied to your overall debt but that is offset by its higher interest rate).
@@zilvarro5766 I'm kinda confused how it's offset when the payoff on my home in particular would be 7 years and change with a VB strategy while my current mortgage is obviously 30. Nothing changed, just where my money went.
I just started velocity banking And I’m still studying every which way to learn more. My first month I was able to pay off two credit card balances? I don’t know how that happened but I ended up having money to pay all my bills and advance on paying off debt. Sure you will pay a little bit of interest but it beats paying the bank in overdraft fee which I’ve done on countless times. Velocity banking also how’s allowed me to have the money or the ability to pay my bills without fear of not having the finances to pay them with. The biggest key to anyone is you have to be consistent and always put what you will need into your source of payments whether a Credit card or a HELOC however you are receiving the finances make sure that your funds are always there otherwise the velocity banking will not work.
So is it my imagination when i run the math on a loan i have for 4 years vs payimg it in 13 months with Velocity banking method ?? Or is the calculator not telling me the truth ?? Its just math...
Why do they promote velocity banking so much then .
Bottom line.... You should be supportive of debt elimination. I am sure others will find fault in your logic.
Velocity banking helped me pay off my house quickly. How? I found out very quickly it sucked after I was tied up in a HELOC that was financially worse than my mortgage. Since i was tied up in it, i had no choice but to pay it off as quickly as possible. So i tightened my belt up and threw every dollar I had to pay it off. I’m not sure I would've had the discipline to be so aggressive if I would’ve stayed in my safe conventional loan. Im so grateful for the horrible advice on getting a HELOC, putting me in a bad situation, and forcing my hand.
Can we get a copy of your spreadsheet used in vid?
Thanks for being detailed with your content. This is the information I have been looking for and I trust your advice.
I wrote a software to simulate my numbers using velocity banking . 60k debt 10 years (20k int) paid off early in 4 years saving about 10k of int
Great, glad to hear you checked the math. Now do the same thing but just assume you put the same amount of extra money straight into the loans instead of doing it with a Velocity Banking strategy. If
- using Velocity Banking - you're using another loan with a lower interest rate than the loan you're trying to pay off, then VB might work for you. But if the loan has the same interest rate or a higher rate, then it probably will not work for you and you'd be better off just paying your extra cash directly into the loan.
@@TheWilliamLeeShowwhat about the min payment your not paying on the with the second loan? That payment or lack of payment gives your extra spending power each month.
Smoke and mirrors, again. All borrowed money has to be repaid. All interest has to be paid. At best you're time-shifting payments. @@SalinasBMW
How do people not understand that the only way to pay off any debt faster is to get a lower interest rate or pay more toward principle.
Sir you are missing the fact that vb free up cash flow which is one of the primary points of vb. Since a simple interest cc payment is satisfied through paying your check onto the credit card-it frees up that minimum payment and then lowers the average daily balance.
It's not that it doesn't work it's just that it works on psychology rather than math. You see velocity banking is designed to change the emotional impact of carrying a balance by making all scales equal. With ordinary finance your paycheck feels like a windfall and so it's very easy to spend spend spend and not have enough left over and you're forced to charge charge charge to make up the difference in bad spending habits. If you start from the assumption of someone who has horrible financial habits when they switch to velocity banking it works amazing because now there's no windfall but only massive debt staring them in the face so they feel the emotional impact of being scant broke and deeply in debt so now they're highly motivated to pay off that debt.
That's the best breakdown I have seen. Bottom line is, it doesn't work on the math side. But I also contend that if you are able to make yourself go through all these gyrations successfully and follow the plan, then you should be able to do it the conventional way. A spendthrift is not going to care either way, and it will fail.
I gave this a thumbs up and then took it back when I didn't get the confirmation bias I was looking for haha Just kidding, thanks for the details.
Thanks for this video. I stumbled across this velocity banking concept on UA-cam a few weeks back and ran the numbers the same way you did. There’s surprisingly many videos out there on VB but very few of them actually compare just taking the extra cash flow and making extra payments.
and when you tell them they ignore you when I explained moving my extra money against one card .
All your qualifications don’t matter to those who have achieved financial freedom and peace from doing velocity banking. Including myself.
My qualifications are only to tell the audience that I know how to do financial math, and probably better than most people. The thing that matters is the math itself, which proved that Velocity Banking - in the scenario I was evaluating in the video - is NOT the optimal way to go. Simply hoping/believing otherwise is not a good choice..... do the math, and trust the math. Finance is math.
@@TheWilliamLeeShow Finaly you just made a statement that is true and accurate thank you. I feel you may have picked a bad video to disprove VB on. Makes me wonder if you searched for the perfect video to debunk VB?
@@TheWilliamLeeShow I apologize but I also many degrees and used and 9% APR HELOC to pay down my 2.25% Mortgage because the payment were roughly $1500, $700 to principle and $800 to interest at the 4 year mark so that was annualized a over a 1000% APR. Time was my enemy and saving $20k to pay down in chunks was much slower than leveraging an LOC. So the LOC allowed me to leverage money at 9% APR which was wildly less expensive. What your saying has merit if leverage wasn't a FASTER vehicle like it was for me. Anyway it allowed me to pay off a 30 year mortgage starting at the 4 year mark in a total of 8.5 years. And yes I cycled my whole income through the HELOC to reduce monthly interest and used extra money to pay down the LOC. Not magic just massive savings on interest.
Super Helpful Breakdown
Thank you
Velocity Banking is being pushed hard and for Good Reason. Banks are making $ on compounding interest rates
There is no compounding on a loan…unless it is a negative amortization. Compounding refers to paying interest (or more commonly dividends) on a growing balance. If your loan balance is going down, there is nothing to compound.
It works and your title means 👎.
I got out of debt using my cc and velocity banking.
Both ways work, but velocity works because it gives you way more cash flow to work with and you make the debt payoff more convenient.
Where does it give you more cash flow.
@@SFXD24paying of the truck, credit card, and loan off gives you $1,028 in cashflow. Since the paycheck is paid into the credit card, you have no payment on the credit card.
@@justincoffman4508No payment…except your entire paycheck!
VB worked for me too. Read about it years ago and didn’t start it until last year. Had 3 years and 3 months left on car loan. Paid off in 3 Months! Yes it can work for some people.
How??
There are benefits to Velocity Banking: lowering interest, lowering balance, credit going up, increases coming in. If you don't like it, don't ruin it for everyone else. I'm personally using more than one strategy to attack my debts. Each one has it's own benefits. A multi prong approach is best.
You are doing the process all wrong sir. The checking account and the line of credit are linked at your financial institution so there are no transfer fees and no over draft fees. To use velocity banking correctly your checking account should always be on zero.
This makes no sense. You are paying down the credit cards each month before the grace period ends so the interest is ZERO.
What do you know about infinite banking?
I've looked at it a little but not enough yet to be able to comment on it. Looks pretty shaky to me, though.
Shaky? Hum-what does that mean exactly? Read Becoming Your Own Banker by R Nelson Nash. You have to use participating whole life for it to work exactly how it is supposed to. However, some people use an IUL which is not the instrument that was made for IBC. I have one ( Insurance for 8 years MBA etc etc blah blah.)
@@YouAREyoubeYouit means exactly what he said. Read his whole paragraph.
It's working for me...maybe you don't understand it.
Thanks for explaining it so clearly.
The math simply ain’t mathing.
Just doing extra payments on the mortgage will make you achieve the exact same thing, but without the fluctuating intereste scare you need to live with.
Only scenario in which VB could work is if the heloc rate is lower than your mortgage rate, which generally is not the case.
so not true. you do not need a lower rate at all. amortized interest vs daily simple interest. if you paycheck park at beginning of month and offload expenses to CC and pay CC in full at end of month, you reduce interest expense greatly and your effective interest rate on the heloc is lowered.
I was at first was skeptic about velocity banking because the person made a math mistake by not counting expenses in the last month. I setup a spreadsheet and went to town with multiple scenarios including a ploc at 24 percent. I would get out of debt in 8 years vs 20 years and save 50k in interest in the worst case. scenario. The trick is that the heloc amount must be paid in a year tops and you need good cashflow. But it works and it is disingenuous for you to flat out reject it. I agree it is not for everyone but it works. The trick is you pay your lowest balance first to increase cash flow.
He’s forgetting the cash flow. That 100 600 and 200 dollar payment turns into cash flow vs when you paid the first way you couldn’t use that cash. You lose money.
Hes right. Did the math to see if it would benefit us to pay our 30-year mortgage off early, however, we realize that by putting all of our cashflow into the balance helps us pay off our home in only 8 years without taking out a line of credit like with velocity banking suggest! With velocity banking, we could pay it off in 14 years (16 years early) but you still pay interest and just paying extra every month saves us more money and the balance will be paid off even sooner! Everyones situation is different. Velocity banking may not work for everyone and there could be better alternatives to paying off debt.
That doesn’t make sense. Could you explain it in mathematical terms by chance? How would you double the debt payoff time by paying off the same amount but using a heloc then paying that off ?
Okay its open ended vs closed ended debt. Revolving lines of credit is the point of velocity banking
He as a cfo probably used lines of credit in his business as a way to even out his monthly cash flow. He knows this but he wont tell you....
Analysis flawed. Doesnt take into account increase in positive cash flow from snowball payment method for higher interest debt cancellation elsewhere and not just the original mortgage.
But when ive seen examples, it wouldnt be "11 months". It would be 11 pay periods..
@monica9070 - Rewatch the video.
The videos I have seen so far do not mention taking out any additional loans, and are much simpler than these scenarios.
This is the famous will I keep hearing about. Yea he took two extremes to try and drive home a point against VB, but in any topic one can find two outliers to propagate their assertion. VB works at least with a HELOC and a CC grace period to defer interest rate. But the most fundamental thing he forgot regarding the HELOC strategy is Liquidity! If u use your extra 2k cash flow straight into the mortgage you don’t get that 2k back, it’s gone period. But if you use 10k from the HELOC and pay down your mortgage and repay it down, you get access to the capital again and again! Hence the revolving credit line.
I didn't take two extremes. I took an actual example of "why velocity banking works" from a popular Velocity Banking channel and proved that it actually did not work in that situation..... meaning that what worked better than VB was to simply pay the extra available cash directly into the mortgage. Also, I didn't forget about liquidity. To maintain access to liquidity, all you need to do (if you qualify) is get a HELOC and then don't use it! Pay off your mortgage directly instead of the VB nonsense, and if you need liquidity, then you can draw on the HELOC. Critics to my videos say I forgot about this or that, but 100% of the time they were incorrect in their critiques - I did not forget, they simply misunderstood.
Thank you for this side of the story...Velocity may work, since you are overpaying on your credit card, not using cash advance...I agree about the Heloc, unless a lower rate-it does not make sense.
It worked for us
Hi from Costa Rica Thanks for you excellent information.
You start off by saying "cash advances," and that's not how it starts off to begin with.
Well, i tried it with ploc and paid off my 5 year car loan and 2 cards in 12 months.... so for me it was proof that it worked