Is Velocity Banking Strategy a SCAM? Expert proves it doesn't work.
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- čas přidán 25. 08. 2024
- Velocity Banking Strategy is often a scam. It's supposedly a way to pay off your debt faster - maybe your mortgage - by doing debt consolidation and debt snowball using a revolving credit line like a Home Equity Line of Credit (HELOC) or a credit card. However, in many cases, the Velocity Banking strategy doesn't work. This video is velocity banking explained: I explain and demonstrate why using velocity banking could take longer to pay off your debt and cost you more in interest expenses. Velocity banking almost certainly will not work to pay down debt faster when you are using a higher interest rate revolving loan to pay down a lower interest rate term loan. It might work if you can use a lower interest rate revolving loan to pay down higher interest rate term loan. However, it is less common for someone who is burdened by a high rate term loan to be able to get a lower rate revolving loan.... which is why I make the general statement that Velocity Banking Doesn't Work. This is an important topic in personal finance. Watch the video to see the actual math for several scenarios. People interested in the debt snowball method and the debt avalanche method will find this useful, too. Check out some of the videos from Vanntastic finance, Velocity Channel, Suze Ormon and Dave Ramsey for other opinions on the topic. Some agree with me, some don't. I showed my math in full detail.
Your host in this video has been the CFO of several software companies and offers a lifetime of business experience to his audience. Will has an undergraduate degree in Economics, an MBA in finance from Cornell University, earned the CFA charter (Chartered Financial Analyst), and has worked as an equity research analyst at top Wall Street firms in addition to his experience running entrepreneurial companies.
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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.
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.
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.
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.
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
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
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
It's all about the difference between "amortized interest and simple interest" which I don't think you explained here.
It works and your title means 👎.
I got out of debt using my cc and velocity banking.
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.
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.
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.
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
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.
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.
What about including 0% interest first thirty day credit cards. Also cash back and rewards benefits?
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 ?!!
"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.)
Sorry buddy velocity most definitely works once I understood it I applied it and got myself outta debt so expert don’t lead people away from financial freedom
If you do the math, which I did, and it shows that it does not work if applied a certain way, then to say otherwise is just wishful thinking. To be clear: I define "works" as meaning that a method does a better job than the alternative. VB clearly did NOT work the way this other CZcamsr presented it, yet they presented it to say "look at how great VB is."
well again it worked for me rapidly of course i focused on it the concept is money flow and it works just another debt tool and sir brought my credit score up significantly don't know whose example you broke down but I'm here to say if you're in debt this is a good way to get out fast @@TheWilliamLeeShow
Yes, except it doesn't. If you had the money to pay down your debt, you could have done it just as fast and probably cheaper just paying it directly. If you disagree, can you point to the error in the spreadsheets?
@@Matt-nx4w if I had just payed the bill now that’s money out of my bank now it’s gone can’t use it again however if my pay goes directly on a debt tool it pays that down and pays the bill and I still have cash flow I’m not saying this is the only way to do something or best way or there’s no other way just saying it worked for me and for myself any good advice to bring wealth and control over my money is welcome I’m not downing no strategy
Your math was on a truck loan that is almost paid off when the interest is a fraction of that in the front end. Re-do it as a new loan at 7000 that’s rolled into a card under the same scenario and see it all makes sense.
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.
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.
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?
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
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.
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. czcams.com/video/VsCt0LruiRk/video.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 CZcams this to confirm.
Also, there is no such thing as amortized interest, you’ll hear that term in VB videos.
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.
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 ?
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!
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
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.
Sooooo, in another words, YOU ARE STILL IN THE MATRIX.
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.
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.
So I was correct in thinking the best form of Velocity Banking is to just make more money which then allows you to payoff your debts faster 😅
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
What kind of idiot would transfer 12% car loan to 21% credit card and pay 4% transfer fee?
You found the most idiotic example of VB and deBANKED IT.
You're such a genius 😮
Weird because it worked for me-huh🤔
Prove it with real figures. Some people aren't idiots and don't believe your b*******.
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
This video shows that an MBA from Cornell doesn't equate to much in practical financial strategies (no offense). As others have pointed out, you failed to include the freed-up cash from paying off other debts, which should flow back into the PLOC or HELOC. Additionally, for something like a mortgage, I didn't see the "chunk" payments from the HELOC/PLOC going towards the mortgage principal each time the HELOC/PLOC is paid off.
Those extra funds seem to be unaccounted for, which is crucial as they represent the momentum/velocity used to pay down high-interest debt. I would appreciate it if you could share or make your spreadsheets public, so I or someone more knowledgeable could make the correct Velocity strategy adjustments and clarify your perspective.
No offense, but you're obviously wrong. A person doesn't get to be CFO of a company by making silly financial mistakes. My video is accurate. People - and obviously you, too - are just not following the math that I presented.
@@TheWilliamLeeShow I couldn't wait for the spreadsheet and went ahead and recreated it as a personal exercise, I will share once done.
1. your spreadsheet presents 1 scenario when the velocity strategy can be altered as needed
2. your spreadsheet doesn't break down total interest paid in each scenario
3. you mentioned a tenant of Velocity banking is paying off debt with a higher interest HELOC/PELOC which isn't true. I'm your scenarios I'm sure if you play with the interest rates you would find one that works for the Velocity scenario
@@KevinWilliams87 1 and 2 are not errors in my presentation, which was the premise of your comment (that I made errors). Re. #3, I didn't say it's a tenant (the correct word, btw, is "tenet"). The video is looking at and analyzing the scenario presented by someone else who is an advocate of VB... so the scenario presented was theirs, and they used higher interest loans to pay off a lower interest rate loan.
On the point of interest rate arbitrage, which is all this is about really, I've said repeatedly that IF a person used lower interest rate loans to pay off a higher interest rate loan, then yes that could make very good sense (depending on the loan terms). VB advocates (particularly the person who I modeled in this video) repeatedly use bad math in their videos to show people how to use a higher interest rate loan to pay off a lower interest rate loan.... which generally speaking doesn't work, which is the point of my video.
Bottom line.... You should be supportive of debt elimination. I am sure others will find fault in your logic.
Kudos to you The William Lee Show for attempting to debunk Velocity Banking. With respect, the only thing you proved is that you were reckless in your assumptions and lazy in your analysis of the numbers. Let’s start with some important assumptions that you failed to mention:
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
The videos I have seen so far do not mention taking out any additional loans, and are much simpler than these scenarios.
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
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.
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 force 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.
Thank you for sharing this. I’ve been trying to find the cons to this. If you have time could you do one that shows it using this method with multiple credit cards can help someone. They are saying it will help your cash flow because you would be paying the bills anyway which would minus out your payment giving you more cash flow. They say you should concentrate on one card and sleep the other cards by putting enough bills on the card to equal the payment you would have paid until you can get the main card paid off. Hard to explain so hopefully you understand what I wrote lol
His example isn't even using the velocity method of paying down debt faster to save interest. He just took the money from the loans and consolidated it. Whereas, the velocity method is taking the money from the loans, plus the rest of your income to pay down the consolidated debt so your average principal is lower and you pay less interest. He kind of goofed on showing how it doesn't work because he didn't even use their example to prove it doesn't work.
Yes, it appears there’s a lot missing from his example here… What is not mentioned in velocity banking videos, is if there is a timing technique in the payment date/closing date… Or is it just make the payments on time by the due date, with the entire amount of available cash that you have? in examples with snowball/avalanche payment methods, the closing date is important… Does this matter with velocity banking?
@@creativesolutions902 it does matter if it times up but if it doesn’t time up as well then your utilization will always look high until you are able to pay off the debts
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!
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.
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.
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.
It works if you spend less than you make... it's not a scam, its a technique, but you still need discipline.
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
Velocity baking is way better. I don’t know what you’re talking about.!
Cool picture on your YT profile. Re. Velocity Banking.... no, don't think so!
This makes no sense. You are paying down the credit cards each month before the grace period ends so the interest is ZERO.
"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
You sir, are providing a valuable public service.
You may be too polite!
Pragmatic, honest, helpful.
Thank you for taking the time.
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
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.
Ok.. he's using the worst example of velocity banking. The way to do it is with a line of credit, not a credit card.
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
Thank you for this presentation.
All of the VB videos I have watched, while the presenter is confidant it works, it is just simply too confusing, and I say this as someone with a considerable amount of college level math. I also say this as someone that has no debt and thus I'm not influenced by the fog of debt, which I assume is the condition of many of those who might find VB attractive.
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??
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 🤔
MR. LEE, YOUR MATH IS WRONG, AND YOU OMITTED KEY FACTORS, THE BIGGEST BEING THAT A MORTGAGE INTEREST IS FRONT LOADED, THAT'S A HUGE DEAL, AND I KNOW YOU KNOW THIS, YOU ARE WAY TOO SMART TO PRESENT THIS THE WAY YOU DID, I THINK YOU HAVE AN AGENDA AND AN AXE TO GRIND, JUST MY OPINION.
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 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.
I don’t think this is very well through and he mentioned a HELOC of $10,000? Who would even waste their time and effort getting a HELOC for $10,000?
Most examples I’ve seen would be people paying off multiple high interest credit cards because they could get a HELOC for a very large amount of money predicated on the equity they have in their home . And then this process would be calculated.
In generally, the high amount of minimum payment would turn into excess cash in these examples.
He was just seeing examples of very tiny amounts of transaction money
When you see so many people making the same type of videos, makes you wonder what camp all these guys are coming out of. Like what business model were all these people making videos were told to use.
Not to mention the fact that most home owners are either upside down or HAVE NO EQUITY in their homes when they first purchase them, which makes getting a HELOC impossible.
Good point
The first time I saw a velocity banking video I didn't need to do any math to know that method was bogus. Simple logic tells us consolidating a lower rate loan on to a higher interest rate loan will accrue more interest.
It's just a modern take of the "free lunch" or the "perpetuum mobile"... usually based on miscalculation or downright scam.
Not if one loan has a grace period..
I was recommended the exact channel you are referencing for the examples. Specifically, the mortgage video in your second example. I instantly recognized it was snake oil, and even set up my own tables identical to what you set up. I think you needed to point out some perverse incentives of the individual behind the video, as she links to place offering a LOC. Of course it's the best thing ever! She's the one selling the idea.
I think your video would best be concluded with asking someone believing in velocity banking what their goals are. If someone is trying to pay down a mortgage quicker, then the natural action to take is to put disposable income towards the principal. What is completely unintuitive is telling someone to instead go into even MORE debt at a HIGHER interest rate calculated daily and apply that to the mortgage. Even pretending that in the most ideal world that this could put someone further ahead, it's picking up pennies in front of the steam roller. Someone could easily be ruined as a result.
One last thought that I had about the video we both watched, the title was saving something like $69,000 in 23 months. Going into $10,000 in debt to make a lump sum payment does not mean that someone will magically find and extra $69,000 in their bank account after 2 years. The entire selling point of her video is after 28 years, someone will "save" $69,000, all while taking what's possibly the riskiest way to get there. The balance sheet of the debtor in this example is still on the hook for the same monthly payment, the $10,000 HELOC at a higher rate and the daily interest that comes with it. Just absolute snake oil. Thank you for putting my thoughts into a video. I hope you get twice her 1.8 million views. Unfortunately, people don't want to watch a debunking video, they want to watch the magical solution video.
Thanks so much for taking the time to comment. I agree... people are looking for a solution, and these channels present VB as something almost too good to be true, and people just want to take it and run with it. Unfortunately it doesn't work.
Everyone that has tried it keeps saying it works wonders … maybe y’all are both just bad at finances and math?
what it does is satisfying a pay e t i the one using bills to post there. Then that pmt can be moved to one of the cards your working on plus the reg pmt which lowers the principle and interest. This should pay it off sooner. Thats what I can see but she would not comment to me. I was using a credit card to help pay off a high interest
month with larger pmts and lower the interest. Kinda seems like this works.
The thing that makes it seem so convincing, is that the 69k savings in interest are real, but they come from using the excess money to regularly cut down the mortgage (as opposed to keeping it on a savings account or spending it). The whole VB/LOC stuff has nothing to do with those savings, and they use those savings to cover up that the LOC will actually lose you some money.
Mortgage rates are not higher. Read your disclosures and amortization charts.
I think Dave Ramsey illustrates the 'Debt Snowball' method, which is no more than paydown your debts best you can. Consolidating may work in some circumstances, but there is no substitute to getting out of debt and then using debt responsibly.
I always say, "You ruin a good story by getting the other side." Thanks for the 'other side'.
What if the other side is incorrect? Would you be thankful then?
@@jenniferabbott976 I guess you remain in debt.
@mikep4869 My whole point is that this man's math is seriously incorrect. So, how did you "get the other side"?
@@jenniferabbott976 His math appears correct. We paid our mortgage out considerably faster by making the additional principal payments each month. Could have done it with a Personal Line of Credit, but it really made no sense. It really comes done to personal financial discipline and using credit responsibly.
The 'other side' is this YuoTube presentation here. It all depended on when you make that first extra payment.
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.
Thanks for this video. I stumbled across this velocity banking concept on CZcams 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 .
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.
Says the 'Get Rich Fast' guy??
Be supportive of people getting out of debt.
No specific financial diet works for all.
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.
Thank you for being a voice of reason. I don’t understand why so many people are promoting this ridiculous concept. Are they just trolling to see how many suckers there are?
After seeing a few VB videos, I could not see the logic. Thanks for laying out scenarios in Excel. Notice how proponents of VB don’t. Some banks don’t even offer HELOCs anymore.
Thank you for uncovering the truth, I had watched a couple of those velocity banking videos and the people explaining that so-called "method" in them did not even touch the topic of interest, which made me question their credibility... Shockingly, those velocity banking videos have tens of thousands of likes and comments of people that claim how much it helped them, but no one could explain why or how it worked for them. What a strange phenomenon! People need to be more on guard when watching online content...
I have a BBA in Accounting with honors, saw one of her videos and thought "Sure, I'll entertain this." So I started pausing to double check her numbers and quickly found a sleight-of-hand as well. Great to see knowledgeable people like yourself calling these Velocity Banking cranks out.
Thanks, appreciate that you double-checked her work, too! It's enough to make me think I'm crazy for doubting it, but it doesn't work!
Which video, and what was the sleight of hand? Help us out please.
@@jameskinchen2148 Sure James, happy to oblige. See:
VANNtastic!, _You’re Not Poor…You’re Getting ROBBED!_ posted on Dec 22, 2023
"A mistake/misleading part of your calculation comes at 8:25 when you reach month 6 in the line of credit. You can't pay off $10,000 at $1,100 a month in 6 months. We can even see where you stopped halfway through the calculation and didn't keep adding the expense. This mistake has a huge carryover effect since you're using it as the basis of paying a "$10k chunk every 7 months"."
@@jameskinchen2148 Crickets from the OP. Hmm
It seems like one benefit of using a home equity line to pay off a mortgage in chunks is that a person has access to their money again if they need it. If they just put that extra money into their primary mortgage instead of paying back a home equity line, that money is totally tied up in the mortgage and inaccessible instead of being available to them in an emergency.
Everyone claims this, but it isn't so. You don't have access to the money you paid. That money is gone. The only thing you have access to is more borrowing, which you could do outside of VB.
@@DouglasForth 🤣 Yes, since this comment, I have done more thinking and came to the same conclusion. I should delete it but I’ll leave it now so other people can see your correction to my line of reasoning. It seems the best and simplest way to pay off a mortgage early is just put all your extra money toward paying down the principal. But, I do still like the idea of having a home equity sitting there as an option to use if I needed it in a pinch.
Paid off my mortgage in 8 yrs using velocity banking. ‘Nuff said.
I'm not sure who you're watching to gain your velocity banking info but, the gal at Vanntastic does not advocate switching debt over to a higher interest credit card. Also, you don't seem to account for someone depositing their paycheck twice monthly which does indeed cut down on the daily average balance and interest calculated on it.
Yes, she does. I've seen it in many of her videos. It's ridiculous.
In the math used in the video, I do indeed deposit paychecks multiple times per month into the account, so the interest effect of doing that is included.... and btw, it makes almost no difference at all.
@@TheWilliamLeeShow Sorry but just wow. Tell that to my credit card statement. 4 months ago would have taken 47 years to pay off, today that is down to 26 years in 4 months of VB. Unbelievable we were never taught this including in college, just wow
@@TheWilliamLeeShowYou talk about when the paycheck goes in affecting the outcome. Just do it before you start doing anything else. You need to have it in savings, then velocity will actually work 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.
Analysis:
1. There are five main benefits that result from Velocity Banking. The first is effective interest cost in the LOC. If you would have used the basis of 31.8% disposable income, your LOC balance would have gone in the opposite direction to what your table illustrated. For the record, your table was accurate in its reflection. But it did reflected an assumption that I disagreed with for the reason I noted above. Even IF the LOC applied a 12% interest rate, the resulting effective interest cost would not have been 12% p.a.
2. The second benefit of using Velocity Banking is to improve the principal-to-interest ratio. You recorded a lump sum payment of $10,000 from the LOC to the mortgage; however, you failed to recognize two things: that the change in ratio between interest and principal had actually advanced the borrower 26 months into the future of their existing amortization schedule; and as a consequence, every month the mortgage payment is made to the mortgage company, the amount of money going to interest is less and the amount of money going to principal is more. ALL from the same monthly mortgage payment! That represents a savings in interest and a reduction in time. Moreover, when the LOC is repaid to near-zero, another lump sum payment of $10,000 would achieve another jump in time into the future of the same existing amortization schedule. You failed to show any tables that calculated the change because of the lump sum payments. Incidentally, a $20,000 lump sum payment would advance the borrower 47 months in time into the future of their amortization schedule. You might want to measure that BEFORE you attempt to disprove Velocity Banking
3. The third benefit of using Velocity Banking is what I used to call Pease-of-mind. IF the idea is to reduce the principal balance, thereby reducing the daily cost of interest, it makes absolute sense to put every dollar you have on your debt. One way to achieve this is to send all of your extra money and money from every savings account you have to the mortgage company to reduce the principal. The only problem with that idea is that you effectively lose your liquidity. That means, IF anything goes wrong, you have NO money easily accessible to pay for an unplanned expense. And so, suddenly you no longer sleep at night. Using the LOC allows you to use every dollar to reduce the principal to its lowest point possible to minimize the daily cost of interest, without losing an ounce of sleep. Therefore, peace-of-mind.
I’ll stop here, because I do not want to drag this out one minute longer. But, I would suggest that you run an active LOC for the life of the loan and track the changes the monthly inflows and outflows to calculate the true effect of Velocity Banking. IF done correctly, you will find that you were wrong in your assessment.
Amortization schedules are not contracts. Any additional priciple that is paid will alter your future payments accordingly. Making an extra payment each year can take a decade or more off a 30 year mortgage.
The circular reasoning you people use is baffling. The ONLY way to reduce your mortgage is to pay additional to principle or reduce your rate. This whole cash flow- moving money around is just a useless hassle.
Basically, VB is just taking a loan out AT INTEREST to materialize the cash necessary to make an extra yearly payment or two. You are better off just adding 8-10% extra to your monthly payment...same effect.
The only scenario where the illusion of VB would appear to work is if you got a lower rate on the loc. However, it's not vb at all working here, you are just paying a higher interest loan with a lower interest loan.
Once i saw her trying to rely on the future working out like her math did, i knew that not only VB was a bad idea, but a dangerous one. Way too much relying on future finances to trust VB.
I’m no mathematician but it works for me. The loan officer I talked to at a VERY well known financial institution did the math and with $1900 a month income and $1500 expenses I would pay off $2900 in less than 8 months…… do the correct math….
Sure, just put the $400/mo towards the debt and it will be paid in about 8 months. No magic there.
@@Nsmithq99 yes but putting in all ur income cuts down the interest u accrue
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.
Thank you for the warning but your math is off.
Thank you so much for clarifying. I knew something was fishy with this method.
I would love to see A CZcams debate with a couple of the velocity Bakers!
The borrower is servant to the lender! 😂
The debt snowball method is the best method for getting out of debt!
Highest interest rate first, and refinance or consolidate to lower interest loans if possible. Snowball is good if the amounts are small and it simplifies your life but if you owe $9000 at 7% and $15000 at 18%, you should definitely pay the larger loan first because each amount of principal you pay saves you 15% vs 7%. Likewise, pay down your loans before saving (except emergency fund).
Banks benefit from you parking your income there until it goes out to pay bills. Banks do not reward us like they used to with decent interest accruing. You might as well benefit yourself with letting your money be parked somewhere where YOU ARE BENEFITING. Like moving your money to the balance of a line of credit / HELOC that is linked to your credit account so you can make payments out of it to pay expenses the velocity banking way. No doubt banks don't want you to hear about velocity banking. You will owe less in the long run. Maybe some people are being enticed to discredit this method. Idk. At least you knock the monthly credit card or loan payment off so you have more cash flow with the VB method. Most Americans live paycheck to paycheck or endeavor to be able to do that. Most Americans aren't able to afford getting flying lessons in their spare time.
Who cares whether or not "banks benefit"!! The ONLY thing that matters is to use the payoff method that benefits YOU, and I'm sorry to report that much of the time it is NOT Velocity Banking. Be smart. Don't get conspiratorial about what banks do or don't want - that's complete nonsense.
@@TheWilliamLeeShow I would think anyone would care when the bank is literally benefitting at their expense.
True, however, the Velocity method gives you access to your cash flow in case of an emergency so you don't up your cc balance each time you lower it like a vicious cycle. It's just a simple method to create some monthly cash flow.
Or just have the line of credit and don’t use it. Then it is available for emergencies without incurring any interest charge.
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
If I have 1k cc debt. My monthly paycheck is 800. My expenses are 700. I pay 800 toward cc bringing my debt down to 200. Then I use 700 loc to pay my bills. Do that for the next 9 months. My debt is about payed off and my credit is tons better. And I get to keep more income. That is not a scam.
That misses the point. Watch the video again.
That’s the same as paying $100/mo on the card, which obviously takes 10 months to cover the principal, plus the interest charges…so somewhere around 10.5 months.