If you’re staring down the barrel of three decades of monthly payments, you’re probably on the lookout for ways to shave off a few years or more. Anything that can help break the cycle of ever-mounting interest payments that take more and more of your income.
If that’s you, you’ve come to the right place. Today, we’ll explore velocity banking, a high-level debt reduction method that helps you strategically manage your cash flow to pay off debt faster so you can focus on building wealth. Below, we break down what it is, how it works, and why it’s such an effective way to eliminate debt.
Velocity banking is all about using your money more efficiently. Instead of letting your cash collect dust in your checking account while your debts accrue interest, this method puts it to work as soon as you get it by leveraging a line of credit to reduce the interest you owe.
Essentially, velocity banking turns the line of credit into your central financial hub, and by redirecting your money into it rather than a regular checking account, you instantly lower the principal. The end result is less interest, more money going toward your debts, and a faster timeline to debt freedom.
Velocity banking works by shifting how you manage income, expenses, and debt repayment. At its core, the strategy uses a line of credit to minimize interest costs and accelerate debt payoff, turning your cash flow into a powerful tool for financial freedom.
As mentioned above, velocity banking typically involves a line of credit as part of its core strategy. That’s because traditionally, interest on things like mortgages, car loans, etc., is calculated monthly. But with a line of credit, it’s calculated daily. So, the faster you lower the balance, the less you pay in interest.
For homeowners, the Home Equity Line of Credit or HELOC is the way to go (if you don’t own a home, you can use a Personal Line of Credit). A HELOC functions like a big credit card that’s backed by your home’s equity.
With this strategy, you’ll leave your checking account as is and use the following game plan to leverage the HELOC for your everyday expenses and outstanding debts:
Paycheck Parking
● Paycheck parking involves depositing your paychecks into the HELOC to instantly cut your outstanding balance down. Since HELOC interest is calculated
daily rather than monthly, this handy little trick lowers your balance as quickly as possible so you owe less interest.
Use a Credit Card for Monthly Expenses
● To avoid pulling from the HELOC for things like bills, groceries, etc., you can use a credit card (preferably with cash back rewards or travel points) to 1. Take advantage of the 0% interest period before it accrues at the end of the month (make sure to zero your balance before the due date!), and 2. Earn cashback, travel points, or reward points for the added benefits.
Use the HELOC to Pay Your Credit Card Balance
● Rather than your checking account, use the cash from your HELOC to zero out your credit card balance. This will prevent you from accruing interest on your credit card while minimizing the interest charges on your HELOC at the same time.
Apply This Same Strategy to Larger Debts
● As you save on interest over time, you can use the HELOC to make large payments on your big balances, like your mortgage, car loan, student loans, etc. Focusing directly on your principal like this will reduce your repayment time drastically.
Rinse & Repeat
● Every time you get paid, repeat the process. Paycheck park, handle expenses with your credit card, use the HELOC to pay the credit card balance, and commit as much money as you can to your debts.
When executed well and consistently, velocity banking will put you way ahead of your lender’s repayment plan. But that’s not the only benefit.
Each cent that you earn works harder for you, the line of credit gives you more flexibility than a fixed loan, and the strategic use of your credit card means you’ll earn a ton of rewards along the way.
However, as helpful as velocity banking can be, it takes a lot of planning, discipline, and consistency to do it right. If you fall behind on your HELOC or credit card payments, you could end up digging yourself into a deeper hole.
That’s why it’s crucial to stay on your A game when using this strategy. But if you’re wearing the hat of a spouse, parent, employee, and family member, it’s not always that simple. With so
much on your plate, it can be seriously challenging to handle all the legwork it takes to stay consistent on your own.
Luckily, there’s a little something called automated velocity banking that can take the reins and do all the hard work for you.
Rather than keeping track of all your accounts, interest rates, and cash flow on your own, there’s a program out there designed to run this strategy automatically. This powerful tool uses your financial information to perform calculations that determine what debt to pay off, how much, and when, to get you out of debt as fast as possible.
It’s called the Money Max Account (MMA), and so far, it’s helped thousands of families eliminate over 2.8 billion dollars in debt and counting.
In fact, this tried-and-true system is like automated velocity banking on steroids. It tracks every aspect of your finances around the clock, guiding you toward debt freedom like a financial GPS and displaying your progress on a customizable dashboard. With MMA, you can set and track custom goals, monitor how the program adapts to changes in your cash flow, and see the exact date you’ll be fully paid off.
It’s like having a team of financial professionals working for you around the clock, guiding you to the finish line, where you can finally break free of the debt cycle and start building wealth for you and your loved ones.
If you want to learn more about the Money Max Account, including how it can help you pay off all your debts in as little as 7-10 years, fill out the form below for a free one-on-one consultation. Our financial experts are standing by to walk you through how it works and get you started on your journey to a debt-free life.