Everyone wants to be out of debt as it can be a trying experience and with velocity banking, it can be put to work easily it just depends on how faithful you are in the process. I guess no one likes to be in debt, personally speaking, I just haven’t met one yet.
You may have heard of velocity banking before and do not understand what it is all about while some may haven’t. If you are in this category of people, you just found yourself in the right place as we would be showing all you need to know about velocity banking.
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What is Velocity Banking?
Velocity banking policy concentrates mainly on using a Home Equity Line of Credit (HELOC ) to leverage disposable income for the purpose of paying up your montage.
Usually, banks will loan up to 80-90% loan combined that equals the value for a second mortgage. It all depends on your level of credit and if your property has a reasonable amount of equity, you would be allowed to borrow enough to pay your monthly charges standard deductions.
The main purpose is that you would be able to use the credit line as your main account to pay the required monthly charges and the remaining balance of the disposable income would be used as the standard reduction payment for the first mortgage.
This system helps eradicate the desire for a savings account as all of your additional funds would be used for the required standard payments and still gives you the opportunity to have access to needed purchase funds for the leverage of equity.
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How Does Velocity Banking Work?
Let’s take a look at this example to help you get a clear picture of what velocity banking is all about. Below is an example.
Mary owns a house worth $250,000 and the mortgage balance for the house is $150,000. She also has other debts like a car loan, credit loan, student loans, and more it is expected that she would make payments of debts by using your checking accounts or by electronic means.
This system will make Mary pay a high amount of interest as the interest is spread across all debts in that way the bank will receive a large amount of interest paid in advance. This strategy alone protects the banks’ income in case of default from the borrower and refinancing.
The velocity banking system allows you to apply for a HELOC or other credit line available to you. After it has been approved, you would use your credit line to pay off your debts.
It is expected you use your entire paycheck to pay for your HELOC in this case money is deposited into your HELOC instead of your checking account. The only interest charged by the HELOC is the average daily balance of HELOC all through the month.
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Velocity Banking Saves You Money
With velocity, banking is sure that you are on your way to saving a lot of money. The HELOC system said earlier, charge their interest based on the balance of the payment they make to HELOC.
The interest payment is not combined of interest and primary deduction where the bank piles up the payment on the side of the interest.
Also, if you have debts like. credit cards, and other personal loans you may pay higher interest rates on these debts than on a HELOC. This alone could save you some amount of money.
Velocity banking calculator
Velocity banking calculator helps to determine the set time for your debt to be entirely paid.
Usually, it doesn’t conform with the daily cycle of your monthly budget. It is important you know your current interest rates, minimum payments, free cash flow, your original debt payments, and your recent amortization on any amortized debts such as a mortgage.
How accurate or detailed your information is, the possibility of getting a good assessment for your desired proposal.
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Conclusion
With velocity banking paying off your mortgage and other debts helps to save a good amount of money and also increases your cash flow.
The majority of the people that use the system have found it helpful in increasing their capital supply for the future. This shows that velocity banking could actually be your path way to prosperity.
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