Velocity banking seems to be gaining traction among many homeowners looking to pay off their mortgage loan within the shortest time possible. The strategy gives you hope of paying off your 30-year mortgage loan in as little as 5-7 years if you leverage it correctly. You can deem it to be a debt payoff method relied upon to speed up paying down a mortgage or other debts.
While it sounds appealing, it is essential to do your homework when using debt to pay debt. After all, there are inherent risks you undertake on the way. Here are common assumptions constantly made with velocity banking.
Minimizing Interest is the Perfect Way to Payoff Mortgage
If you’ve done a bit of research on velocity banking, you already know that this concept revolves around minimizing interest costs on your debt. Using this strategy effectively depends on your motivation to cut interest expenses as much, and as fast as you can. This entails giving a close eye to the rates your debt is subject to. Also, you have to leverage all available funds to pay down balances to which this interest is applicable.
- Latest News: Amazon to Cut Another 9000 Jobs
Using Debt to Pay Off Debt is an Effective Strategy
This is one of the biggest velocity banking assumptionto always bear in mind. To use the velocity banking strategy, you must be comfortable with utilizing debt vehicles such a Home Equity Line of Credit (HELOC) to pay off other debt. It requires the discipline to stay on course so your debt balances don’t become unmanageable.
For some people, the velocity banking strategy tends to create a certain degree of anxiety due to the risk involved. If effectively managing additional debt is a serious concern for you, it would be ideal to take up a different approach to paying off your mortgage in the shortest time possible.
Understanding what the velocity banking strategy entails goes a long way in helping you reap the numerous benefits it brings. Ensure you fully understand the assumptions you need to accept the very moment you decide to implement this debt payoff strategy.
