Velocity Banking is a process that enables you to pay off your house in as little as 5-7 years. Guess what? It works!!!
While there are huge benefits, there are also THREE major risks that can hurt you financially and ruin your plans to pay off your debt.
LACK OF DISCIPLINE
It is very easy to take the large amount of credit you receive from a credit card or HELOC (Home Equity Line of Credit) and use it to buy wants rather than needs. Some people use the line of credit to upgrade their electronics, their cars, or pay for large vacations and gambling. These people will put themselves into more debt rather than reducing their debt.
LINES OF CREDIT ARE NOT GUARANTEED
A credit card comes with a limit. The credit card company can reduce that limit at anytime without warning. You may think you can spend up to $10,000 when the limit decreased to $5000. Your credit card can also be cancelled without you knowing. This happened to both my wife and I. Due to inactivity, our credit cards were cancelled. While it is EXTREMELY rare, the same thing can happen with a HELOC. While HELOC’s typically have a draw period of 5-10 years before you need to re-apply for a new HELOC, banks can reduce or cancel your HELOC at any time, especially if the value of your house plummets or they find out that you lost your job.
YOU STILL NEED TO SAVE
Velocity Banking advocates will teach you to dump all of your savings into the principle of your house. While I agree this will save you money and shave off years from your mortgage, I don’t agree with the risk. You need 6 to 8 months of expenses saved in an emergency fund to accommodate for a major expense, loss of employment, or loss of credit. You cannot count on a high limit credit card or HELOC to pay for these expenses. Once you save at least 6 to 8 months of expenses, then stop saving and put all money into your paying off your loan.
You also should consistently invest at least 15% towards retirement. Your money could double every 7 years thanks to the power of compound interest. Velocity Banking could help you save as much as $100,000 in interest in the short term, but you should never pause the growth of your retirement investments.
Open a Traditional or Roth IRA with M1 Finance and customize your portfolio.
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