Remember people this is not your situation, this is only an example using real life numbers. She's only trying to help us grab the concept of velocity banking not be our financial advisor. If she error with her math dont be discouraged 🤫 we are all adults just correct it in silence and carry on. We not here to learn math but concepts to financial freedom that your own advisor will not teach you. Great Teaching!!
Quick note: Beginning of Month 7 ...start with $300 plus the $10K new car balance...would equal $10,300, etc. Just a quick correction to calculations - but I get the concept and love it. Thank you for taking the time to explain everything - there is hope for anyone with Velocity Banking. Continued Blessings Ms. Vann!
Easier and faster just to put the additional $1575 in cash flow to car payment. $600 + $1575 is $2175 a month going to car. $28000 divided by $2175 is 12.87 months. You can pay it off faster by just putting the it all to car payment. Not to mention, most car loans do not except credit cards so you would have to use a 3rd party servicer which would charge around 3%. You could get some benefit if card has cash back or points but I doubt it covers the 3% fee. There is also a mistake in beginning. If you pay the car with credit card at the correct time, the first billing statement on credit card would have no interest.
That 1575 per month you put down on the car loan is all the cash you have. So, if you need cash to go to a movie, pick up relatives at the airport and have to pay for parking, lunch dates, money for kids school trips, and any other reasons to need cash would come out of? LOC / CC therefore the payment of that would take away from the 1575 you have to put down on the car. The interest on the LOC is different from ammortized interest.
I disagree. I don't want my child to EVER get a credit card. We have taught him that you live below your means and save. You cash flow a car. There is no need for a credit score.
No its complete nonsense. It doesn't make any sense. If you want to pay off the 28k loan at 3.5%, moving money to a higher interest loan is ridiculous. Lets say you just make the payment 2175(600+1575) on the loan. Lets round up the interest you could be charged for a year to 28000*.035 = 980. Thats an approximation if you were continually charged interest on the 28k balance. You wouldn't be since you would be paying down the loan, lets round it up to 1k. So the final total is 29k. 29,000/2175 = 13.33. So the loan would be paid off in 13 months and a week, say 14 months. Why on earth would you bother with paying more and doing this stupid roundabout way to pay it off.
I have used a similar method to pay off debt. Am so glad to find out it has a name. I always felt guilty having to use the cedit card again. Now I learn that there is no place for that. Thank you Ma'am.
Miss Christy, thanks for all you do. Please look at this Car amortization schedule. What is different between Velocity and this. Auto Loan Calculator Results Loan Amount: $28,000.00 Monthly Principal & Interest: $431.72 Monthly Extra Payment: $1,575.00 Total Monthly Payment: $2,006.72 Total # Of Payments: 15 Start Date: Jun, 2023 Payoff Date: Aug, 2024 Down Payment: $0.00 Trade In Value: $0.00 Sales Tax: $0.00 Other Fee: $0.00 Total Interest Paid: $627.94 Total of All Costs: $28,627.94
Maybe she could build an online calculator that compares this method with just paying down debt with excess cash each month( or investing the excess cash somewhere else ).
I made one for myself in Sheets, calculated actual daily averages and balances, figured interest cost and extrapolated cash flow over the life of the current debt and the VB Vehicle, the only way this saves you any money is if you have a teaser 0% Interest rate for long enough that you can get out from under the debt before they charge you, otherwise you still end up paying interest. I used my total debt (20k at the time) and by the time I made the final payment using both strategies the difference between the balances was less than five dollars. The only way I was able to get the model to output savings is by using a hypothetical balance transfer into a 0% interest account and you're basically cash flowing paying off your debt. That was the best way I could figure to test the theories and it was the most realistic I could possibly make it. It's actually pretty clear in her video if you ignore the words and just look at the white board. She says there is $1575 cash flow, she uses 6 months in the video, 1,575*6 is 9,450. Just put the $1,575 per month on the car for 6 months and you accomplish the same thing with less interest paid. Maybe I should make a RUclips video breaking it down.
She and people like her would NEVER do that because its easier to sell "Velocity Banking" without the side by side comparisons. The comparison would show minimal net benefit between "velocity banking" and the other methods.
Don’t forget a few of the basic reasons for doing this (no particular order and I’m sure there are many other valid reasons): (1) building credit, (2) lowering interest on unpaid balances, (3) getting “Cash Back” on those types of credit cards, (4) satisfying the credit card monthly payment without actually making the “normal” payment (free up that amount in cash flow), (5) reserving cash flow within the line of increased credit (for emergencies). Otherwise, using cash leaves you with no cash flow, whereas paying down credit card balance keeps the cash flow that’s otherwise lost in a payment. Reserving cash flow while at the same time paying down debt and building credit is the key here. Smart instructor!
What are you both talking about? 1) Your build credit by paying bills on time, getting higher credit limits so debt to utilization rations are lower, multiple types of loans, age of credit, and inquires. So no this does not build credit and will actually lower your credit score as borrowing 10k on credit card will ruin your debt to utilization ratio 2) You are paying more interest with this method 150 dollars interest if you did nothing but pay normally for 6 months, $ 210.50 by her method with 2 missing months of interest as well. Better off just taking extra and paying to car loan directly which is also dumb as 3.5% interest is extremly low. 3 month CDs on fidelity are paying 5.3% so you would be making 2.8% if you invested extra in a CD. Better yet pay the home loan first as it's 6.25% so at least you save .95% 3) You don't get cash back on CC loans if she wanted cash back she would have to buy the car with the CC. 4) You decreased cash flow by tying up your available credit on CC, paying off a car loan doesn't give you access to more money as you don't build equity on a car loan. She could build equity on the home though if she paid that which does have a higher interest rate and makes sense to pay normally with extra cash not CC loan at 21%
@@MichaelFrancisco973 Preach it man. They could pay the car off in 14 months by just sending the cash flow in on the principal every month. This makes no sense.
I don’t know if anyone pointed this out , but there was an error in your math at month 5. It appears that you added month expenses, calculated interest then added month 5 expense without subtracting month 5 income. This becomes evident as your LOC balance increases from $962.90 to $1850.40. The balance should have been satisfied with the month 5 income.
I think Vickie is right. The credit card is used as a cash advance. She doesn't include the fees associated with cash advances, which can be quite expensive.
@@transformwithvickie I do have cash advances available on my cc, but the interest is absolutely ridiculous. But in another one of her videos, unless it was this one, she talks about some checks you can get for pulling $ off your credit card I guess those are convenience checks and maybe I’ll try calling or going inside and asking about them and if they could send me some. Also thinking about doing a my chase loan on one of my 0% interest cards. Chase let’s you borrow $ against your available credit, and they don’t charge you like they do for a cash advance and it’s available immediately in your checking account so I think I’ll try those things and see about paying my car down with that $
This velocity stuff is nothing more than throwing your cash flow towards your loan priciple every month! No magic here folks! The only difference is you can access the LoC if you need cash. So just get a credit card for emergencies? I don't understand.this velocity hype!?! Its silly.
I was wondering about this as well. Thought maybe the car loan was on hold because she pain $10,000 on it, so it's like prepaid possibly?? Just a thought. I was curious so I came to the comments.
Can we see an example without all of the income going to the credit card, because there are some expenses that you cannot put on a card, such as a mortgage?
I can understand chunking a 30-year mortgage where the first 10 years is mostly interest, but I don't see any benefit for such a short loan. If you just apply that $1575/m cash flow directly to the auto loan, you're paying $2175/m towards it. Payoff is 14 months and you still have the full $15k LOC available for any emergencies.
Six months of strictly putting a minimum of $1,575 extra ($4k - $2,425) toward a car payment would yield zero interest expenses from a credit card loan and remove $9,450 off the vehicle’s loan principle. The first month’s interest payment alone is $172. Even if all six interest payments was $80 (average), that would come out to $12 a month extra in your pocket than you would have if you just placed ever extra penny toward the principle. The second month’s interest payment is $135. The third month’s interest payment is $109. The fourth month’s interest payment is $84. The fifth month’s interest payment is $58. You’re paying $556 in interest payments by the fifth month. You have lost $6 by the fifth month plus whatever the total ingest payment is on the sixth month.
If you just added the existing $1575 "cash flow" to the $600 car payment, you'd then be paying $2175 towards the balance every month. If we estimate the car loan interest on the full $10,000 over three months, that's $29.17 monthly or $57.51 in 3 months vs the $287 calculated here. All this is is just accelerating debt payment using all my excess "cash flow" and you can't "create" extra money to pay down debt by taking out another debt, especially one with a much higher interest rate. She needs to run this scenario from start to finish on a spreadsheet to see the true (entire) picture. You can't take 3.50% debt and convert that to 21% debt and claim to be able to pay the debt off sooner and save money. It's a mathematical certainty - with a given income, and principal and interest to be paid, increasing the interest will add to the overall cost.
I don’t follow the logic here… the real reason this pays down the loan is 16 months is the $1575/mo cash flow is being added to the usual $600/mo car payment. You could do the same by paying directly and avoiding any additional interest burden from the credit card simply by making larger payments ($1575 + $600 = $2175) and $28000/$2175 = 13 months albeit some of that $600 includes interest so it’s going to take a bit more than 13 months. Point is avoid the extra CC interest and accomplish the same a bit quicker. Cash flow is king.
You are forgetting about the insane interest that is still being charged on the monthly payment on the car loan which is an amortized loan, meaning the vast majority of each monthly payment is going to interest on that loan rather than paying down the principal. Your math above is not adding all the interest.
And the credit card isn’t going to have loads of interest? Chances are it will have much higher interest given that many cc’s are at least in teens vs single digits for car loans. The reason you pay either down quicker is because you apply your monthly cashflow to the payment which brings down the principal quicker.
So, I have two questions about this. Why wouldn't you just use the 1525 per month cash flow to pay towards the car loan every month? Why do you need to use the line of credit every month and pay interest on all of your expenses instead of just the loan itself. And also, if you were to follow the logic in here at the end of the cycle of paying off the 10K and then putting another 10k on the Credit line towards the car loan. The overall car loan amount would be less than $8000 because you've been paying for the last X amount of months toward the loan using the credit card. I also don't know many car loan companies that let their customers use credit cards to make payments. The numbers work but it just seems like an awful lot of reworking your budget and timing everything to start putting ALL of your bills on this every month. Also, your paying 3.5% interest on remaining car loan with money thats also being charged 21% interest. I might be wrong here but thats how I see it.
Why would anyone willingly use up every dime they have in the bank for that when they have a $15k line of credit to pay it down? Line of credit is easier to pay over time than your car....if your late on the car it gets repo'd. Rather deal with a credit card. Plus if you pay it only using what you have left in your pocket it will take A LOT longer to pay off versus doing it this way.
Bullshit! A 30k car cost 30k there’s only one way to pay that. A 30k balance requires 30k on payments. If you can do that in a 12-16 month timeframe you have an extra 30k a year essentially! If you don’t have an extra 30 k you won’t be able to pay it!
I love this video, but had a question. For mortgages and car payment (or certain payments) you can’t use your credit card to pay, so how would you go about paying that with your credit card?
Please do someone explain to me the following question: how it really works. One takes $10k from LOC and put them into a mortgage lets say. That LOC is -$10000. One puts $4k and it becomes -6000+ the inferest and basically operates with those $4k. The balance is going to zero with the amount of the cash flow...i just dont get it how it works fast.
It's easy when you make more than your neccessary bills. I make $9.00 an hour and my mortgage just went up another $200 a month. I'll be impressed when you can work the numbers for someone like me. Not someone who makes 3X what I do. Can't pay it if you don't have it.
>>>>>> Please realize that this only works IF you own a home with enough equity to work with AND you qualify for a HELOC that typically only allows a max of 75 to 80% of the equity available. You would have to apply for the HELOC (a credit hit) AND pay for an appriasal ($500+?). IF they say your home is worth $20,000 more than your mortgage balance, THEN your HELOC limit is likely to be only $15k - $16k, leaving a cusion of equity. Not all HELOCs come with a "debit card" to pay your expenses out of. Otherwise, you'll want to withdraw chunks of cash ($600/wk ?) every time you need to make an expense payment (groceries, gas, etc.). But, if all is good, you MAY be able to deduct the interest paid on the HELOC along with your first mortgage interest come tax time, a small bonus.
If she was paying $600/m and had $1575/m cash flow like is stated in video, she would pay off $34000 in 16 months. This would more than pay off $28000 car loan even with interest @3.5% factored. Velocity banking works only in certain situations and this lady doesn't seem to understand the difference. She leaves out variables and comparisons when it comes to the math.
All of that $600 per month isn’t principal only. You gotta look at the amortization schedule. By chunking $10,000 to the car changes the amortization schedule and makes her $600 a month payment go towards more principal and less interest. Changes the whole schedule
Instead, just apply the free cash flow to your auto balance and you would have already paid off $18,900 after 12 months not including your monthly principle and interest on the car loan. And, still have the line of credit for emergencies...It's like one is spinning the wheels in the mud with this example to cover the same distance as on dry land if you just used the monthly cash flow towards the auto balance. White board that!
Exactly! By directing her residual monthly income of $1575 to her car loan as a principal monthly payment, she will pay her auto loan faster and save on interest...not to mention, she would NOT obligate herself to make more than her minimum payment. Plus, she would retain $15,000 in cash flow via her LOC for emergencies. Velocity banking may work for people with little to residual monthly income, but it is not the best option for this case study.
I noticed that you used the balance on the car at month 7 of 18000... when you have been making payments on the car for 6 months prior... so that balance would be lower... but not by much ... still a positive :) Thank you for your teachings
It makes no sense to pay down the 3.5% car loan with a 21% line of credit. She should just make additional payments on the car loan, or better yet build up her emergency cash reserve so that she wouldn't need to draw on that expensive line of credit in an emergency.
@@VanntasticFinances how are you not losing the cash flow anyway? In your example, the entire $4000 gets paid to the line of credit every month so I guess the cash flow is gone right? If you just use the cash flow to pay extra on the car loan, then you have the whole line of credit to fall back on if necessary. Using your example, you have zero extra cash flow free and only a third of the LOC to rely on if something comes up. Not to mention, you actually pay the loan off a few months faster by just sending the cash flow in as an extra principal payment every month rather than transferring the debt first.
I agree Norman. I think a better alternative would be to use her cash flow of $1575 as monthly principal payments to her car loan. This would allow her to pay the loan off quicker while retaining access to her $15,000 LOC for emergencies. Plus, she'd have the option to stop applying the excess payments to her car loan without penalty if she experiences an economic hardship. But if she uses her LOC to pay down her car loan, she has obligated herself to ANOTHER line of debt. Also, if she experiences a hardship, she would only default on one loan instead of two. Velocity banking does not appear to be the best option for this case study.
good strategy for those who have no cash flow but for someone with $1500 cash flow the same thing could be accomplished just using it to pay on car. i figure 1 month longer for this result and lot less complicated!!!!
This is highly flawed. The total interest cost on the car loan based on the amortization amount of $600/month at 3.5% that would see the full loan of $28K paid in 51 months = $2,142. Using her method where $28K @ 3.5% is paid in chunks of $10K @ 21% would cost about $950 total (the car company is adding interest on capital for the unpaid amount, the capital is accruing). If the person paid $2,175/month all on the car loan, the loan would be paid off in 14 months and cost $581 in interest total. I mean no disrespect to the instructor or people who wish to follow this method. You need to drop the scenarios in an excel amortization schedule to see for yourself. I don't know the full terms of the loans, but if possible, I would double down on my mortgage payments at 6.25%/interest per annum before paying off a bargain rate of 3.5%. Heck, I would even invest my excess cash flow in a tax-free money market ETF, income certificate or deposit account. Plenty of high yield stuff out there.
Question about the car loan. Since you can only make partial chunk payments on the loan, is the regular car payment with the remaining balance also still included in the monthly expenses?
@@MsALCrespo that’s what I was thinking. Initial payment satisfies month 1 but in month 2 you have to make the normal car payment right? So how does this pay it off sooner?
I respect what your doing. But how about we save all your math and just make it a simple equation. Take her available cash flow each month and take it times 6 (number of months). That is over 10000 dollars. It’s called the snow ball procedure. No credit card needed.
Simply start paying your Cash Flow every month. This would increase the cash flow to (1575+600 = 2175). With $2175 each monthly payment the loan will be paid in less than 12 months. Replacing a low interest rate with a high interest rate will never make the math right.
Cash is King. Not sure why an expensive detour was taken when a straight route was available, faster and cheaper. Just take the monthly cash flow of $1575 and apply it directly to the principal. You would pay the car off faster, with less interest AND not obligate yourself to a THIRD debt! Plus, you would retain your ENTIRE $15,000 LOC to use for emergencies. Why use credit at a HIGHER interest rate to pay another creditor at a lower interest rate when you have the cash flow to pay cash??? Remember, you still have access to your LOC for emergencies... Using velocity banking in this case study is like a person living in New York and traveling to Nebraska to get to New Jersey...only makes sense if its the only route
Agreed!!! Velocity banking seems to work better for people with little to no cashflow, and who have or can get a LOC. It doesn't seem to be the best option for this person.
Month 7 there was a mistake. $300 + $10,000 = $10,300 not $13,000. Also you're not putting any money on the car loan every month which means your expenses would be $600 a month less or you need to also reduce your car balance by $600 a month with exception of the first month where you put the $10,000 down.
Ok, i get it, but where in here did she start paying the car payment again. After month 1 the lender will be expecting $600. No lender will let you go without paying because you sent them $10k. Not for 6 months, the car would've been repossessed. Did i miss something, i just dont see where the car payment was taken care of in month 2 and beyond. If the 600 is part of the $2425, then in month 7 the car balance wouldn't $18k. I must have missed it or I lack understandingy
It’s very simple make 100k a year so be in the top 15% percentile in American income and you can buy a super small or used car. With interest rates from the 90’s. Making up numbers is easy
How many months were on that original car loan? How long would it have taken to pay it off the regular way vs how long did it get paid off in this example?
using a loan calculator, the original loan amount was $45,000. If you would have paid the loan payment ($600) + free cash flow ($1575) each month, you would have paid it off in 22 months.
Just apply the $1575 excess cash flow to the auto loan each month if you want to pay it off early. Better yet, at a 3.5% interest rate, you’re better off putting that excess cash into a high yield savings account right now that is earning over 4%. She gives terrible advice.
If you have zero credit card balance to begin with and a positive cash flow, why even use the credit card? Why not make extra payments of 1500 each month and just use the credit card as a safety net? The difference in finance charges between the credit card and the car loan would be negligible. This kind of stuff makes more sense if you are trying to save on mortgage interest, or trying to pay down a credit card.
I don't understand it, you paid interest of $325.3 on the LOC in the first 4 months and only saved $175($10,000 * 3.5% / (6/12) ) in the total 6 months on the car loan? wouldn't it have been better to just pay the $1575 directly on the car loan? or maybe go for the mortgage first as it's higher rate? Please explain this to me in simple terms as I find it difficult to follow and understand why this really helps rather than just pay all the excess to the car loan.
While the LOC uses the simple interest method, the car loan doesn't. Car loans are an amortized loan which means that the first few years of the loan payments are primarily interest. So the calculations you used for the car loan interest are not correct.
What about the interest that would be accumulated over the months on the other 18k that is left on the car loan? You would have to take that interest into account each month as well. Or am I misunderstanding?
My auto drafts, are you saying change them to the credit card. Will Social security that is paid to my checking account will they allow that payment to go to a credit card
Guys! The line of credit is simple. Not complicated like a home loan or car loan. You get freed up from your debts faster, 6 months to a year rather than 60months for a car loan. So in a year you can buy another car if you want.? Or anything else. Plus she is saving you way more money.
If you pay closer attention, she’s adding the 21% interest every month. You have to watch the videos a few times with different scenarios and you’ll have a better understanding of how this method works
@@Silvi79 its not every month. the 21% interest is yearly then divided by the total days in the year getting your daily interest rate that you times by your loan balance.
I want to pay my auto loan with my credit lines, but my auto loan company is restricting me from doing so. The only way to use a credit car to pay my auto loan is to do it like a cash advance. The CC company won’t approve the amount of my auto loan as cash advance - only a portion of it. And if they do it, it is 30% interest!
@@dougbullis8462 Still confused because the non-traditional way leaves us with no cash flow either because all the cash flow is getting put into the credit card each month. The cash is not available in that scenario too.
@@robertcorbin2749 cash flow will be in the form of available credit on the card (liquid cash if needed for emergencies). Otherwise, just paying the 1575 towards a loan is simply gone and cash flow isn’t realized.
Think, people! A line of credit gives the borrower a cushion against uncertainty. This cushion comes at a price. You will have to use it & pay interest or the bank will take it away. The bank is there to make money and if they don't make money off interest they will turn that line of credit off. So if you're using that line of credit & paying interest, you would be better off not using velocity banking, not pay any interest, and instead use the money that was for interest to pay down the principal. There is no free lunch. Ever.
@@VanntasticFinances Yes, I don't doubt that. But you pay interest because those lines aren't free. I don't pay interest because I don't need any lines. I hold the real stuff: money & investments.
if you take 10 months to pay off two 10000 LOC using velocity banking, you are ahead of 3 months than simply paying 1575 towards principle for car loan. 1575 times 10 = 15750, vs 20000. Please let me know if this is right. Also I think the person should have 6 months of monthly expenses stored somewhere, if emergency arise.
Over the life of that "3%" loan you will pay OVER 50% in interest! Your loan is amortized over 15-30yrs. You are NOT paying 3%. Lines of credit charge you simply interest and you only pay on the average daily balance which will not even be close to what you pay on the mortgage over its lifetime. She mentions this exact question at 18:53 in the video.
She's like my math teacher would always put me to sleep. All I understood was put all your cash flow into a credit card that you will be using for all your expenses, and it will reduce dramatically...em I missing something, not sure.
My only question is, what about the following 5 months of $600 car payments? Is the entire 6 months of payments satisfied by paying it down by $10k month 1!
This crap makes no sense. Her 10k removed from car loan at 3.5% for 1 year interest would be 10000 x .035 = 350 dollars / 2 (for 6 months) = 150 dollars interest if you did nothing for 6 months. Your math is also wrong but even with your interest numbers 88+80+37.5= 205.5 which is more than 150 and you are missing 2 months interest from this calculation. Why would anyone do this?
what about free cash 1575 + 600 loan payment = 2175 x 6 = 13,050. loan amt 28000 - 13050 = 14,950 new bal after 6 months - 13050 = 1900 new bal after 12 months done in 13 months with final payment. did I miss something here ? 3.5 % on the loan maybe adds a little more on the balance.
Would've been great to see the comparison if she used her CF to pay off the car in 2 years, how much interest would she have paid? How much interest paying it off in the same 2 years with Velocity Banking?
My understanding is while you are paying down the $10,000 credit card loan. You are still paying the $600 per month on the car. This would reduce the $18,000 balance for the second $10,000 infusion. Very cool.
Okay I'm sorry but she seems drunk. 10,000.00 + 300.00 = 10,300.00 NOT 13,000. Then she figures the interest on that 13k and its way to high. Also during the 1st 10k moved to the line of credit the car payment went down to 15k. 28.000 - 10,000=18k. Then there were 5 payments of $600.00 which brought that balance to 15k. 15,000 - 10,000 = 5k. But video ends abruptly so we don't know the rest.
@Craig Rider, Interest was 3.5% because, as most car purchases have presently 'joining the club', the loan was for 7 YEARS @ $600 per month. So, whatever the original purchase price of the car, I'm pretty sure it wasn't $50,400! That's how people get fooled into thinking it's a great deal__only looking at the % of interest is costing you TENS OF THOUSANDS! Whereas, that money would now go to paying off her mortgage! I hope that clarifies. 🙏😇✨💫🌱🌿🌻🐝🌳🌎💖🙌😺
She's only running the numbers based on her method. I'm going to run them both ways - 1) using the LOC and 2) just paying the car loan. If it were me, I'd be tackling the 6.25% loan first.
Because the video skips from point 18:18 - 18:34 when she is figuring the interest , then the video cuts to when she has already added that in, and starts adding and subtracting the monthly expenses again. The 4,000 says P/R and was no explanation of what that was. The $119 is the interest on the card. She took the high balance and low balance, divided by 2, then times the interest rate, and then divided that total by 365 days, and the interest was $3.97 day, then she times $3.97 x 30 days for the monthly interest onnthe card, and came up with $119 and added that. Then she put the $4,000 income as a payment back onto the debt and continued on from there. It would also help if she put parenthesis around what are the debt numbers and plus signs as what are credit numbers so it won't be confusing.
That’s because you would pay the car off in a little less that 13 1/2 months if you just added that 1575 extra cash to your car payment every month with out all the extra bs.
Blake, it was hard for me and This, math, is my fortier! It was b 😀cause of initial editing. Skip month 1 and 2. Pick it up on month 3. Thhe process is the sam for any given month. So even the numbers don't matter. Just focus in on the process. Example. Debt created on cc. Income source going on cc and Not into checking acct. Subtract income from cc debt. Add the ttl monthly expenses to cc again. Now here is where she simply gives a template for figuring in avg daily balance. Now if its too confusing, just add in the previous month interest. So total monthly exp's plus interest(prev statement's) plus cc debt is the total cc debt. It just keeps getting smaller because your chunking it down by depositing monthly income into your cc instead of a bank. It's genius! Reread saaaaallllloooowwwly the above. Use a pencil and pad. And start number(i recommend 10,000) to start. Use Your monthly income and total monthly debt to see how it works. Happy calcullating. 👍😄 Wait!... Uh, I spoke too soon. It occurred to me that what she is saying as far as procedure, step by step, may not be entirely complete. Why? Good question. As far as I know, many years gone by, a mortgage co will Not accept CC payment. Too many variables(loose legal ends). I don't know about the last 5 or 6 years. Much has change. Look into it. May even need a 3rd party for it. Too many ????
It makes a lot of sense. I'm just wondering if it matters how much cost you use your LOC for. Like what if you have a PLOC for $20k? Would you use the whole $20k and go thru this process? Or would you do it in $10k increments so the interest rate is not so high?
My only question is the starting point. How is $4000 used when the expenses come out of that? Shouldn’t it start with the cash flow amount? I can’t seem to get that straight but I think I understand the process after that. 😊
After you put in your initial deposit into the line of credit, then pay out your expenses throughout the month. The cash flow will stay in the line of credit paying down the balance.
This won’t work for me because my loc and my car loan are both with capital 1, they won’t let you pay a car loan with one of their credit cards.😢. Do some math when you have a situation like that. How would that work?
The first month, no- since the bulk payment of $10,000 satisfies that month's payment. But every month after that, yes you're right. In the video, she does show the change in the second month on the whiteboard. The expenses go back up to $2425.
Right. But after month 6 going into month 7, she goes back to the 18,000 dollar car loan. I might be confused as well because shouldn’t the car loan be down to 14,400 if we still paying the 600 dollars with the monthly expenses ? And another 10,000 dollar payment is from where? I thought the loan was only for 15K?
Remember people this is not your situation, this is only an example using real life numbers. She's only trying to help us grab the concept of velocity banking not be our financial advisor. If she error with her math dont be discouraged 🤫 we are all adults just correct it in silence and carry on. We not here to learn math but concepts to financial freedom that your own advisor will not teach you. Great Teaching!!
Make sure y’all are watching her ads !!!! Because she’s helping tremendously
😂 well, that was precious! Thank you for watching
Quick note: Beginning of Month 7 ...start with $300 plus the $10K new car balance...would equal $10,300, etc. Just a quick correction to calculations - but I get the concept and love it. Thank you for taking the time to explain everything - there is hope for anyone with Velocity Banking. Continued Blessings Ms. Vann!
Taking financial advice from someone who can't add or "minus" 🙄 seems like a questionable idea. 🤣
@@vcp93 atleast the lady is trying to help us for free minus your rhetoric. I dont have so much patience to help :(
Thank you lol I thought I was going crazy understanding the 13,000 when is 10,300
@@rafytorres4599 my brain exploded at that point.
@@rafytorres4599she made a mistake in month 7 by writing $300 when it was supposed to be $3,000 to begin with
Easier and faster just to put the additional $1575 in cash flow to car payment. $600 + $1575 is $2175 a month going to car. $28000 divided by $2175 is 12.87 months. You can pay it off faster by just putting the it all to car payment. Not to mention, most car loans do not except credit cards so you would have to use a 3rd party servicer which would charge around 3%. You could get some benefit if card has cash back or points but I doubt it covers the 3% fee.
There is also a mistake in beginning. If you pay the car with credit card at the correct time, the first billing statement on credit card would have no interest.
That 1575 per month you put down on the car loan is all the cash you have. So, if you need cash to go to a movie, pick up relatives at the airport and have to pay for parking, lunch dates, money for kids school trips, and any other reasons to need cash would come out of? LOC / CC therefore the payment of that would take away from the 1575 you have to put down on the car. The interest on the LOC is different from ammortized interest.
And by weekly payments reduce principal and time
@@crankybastid2197that stuff should be included in the expenses calculation. But of course so many unexpected things come up
You are missing multiple points.
The fear is strong in this one.
Your video should definitely be featured in schools around America honestly
I disagree. I don't want my child to EVER get a credit card. We have taught him that you live below your means and save. You cash flow a car. There is no need for a credit score.
yes in this system it would be the only way to get ahead
The banks and institutions will not allow that
@@leeannhibbard2749 Dave Ramsey teaches it
No its complete nonsense. It doesn't make any sense. If you want to pay off the 28k loan at 3.5%, moving money to a higher interest loan is ridiculous. Lets say you just make the payment 2175(600+1575) on the loan. Lets round up the interest you could be charged for a year to 28000*.035 = 980. Thats an approximation if you were continually charged interest on the 28k balance. You wouldn't be since you would be paying down the loan, lets round it up to 1k. So the final total is 29k. 29,000/2175 = 13.33. So the loan would be paid off in 13 months and a week, say 14 months. Why on earth would you bother with paying more and doing this stupid roundabout way to pay it off.
I only want to point out this matter. I do not mean any disrespect in any way. I respect you for dearly teaching this stuff . Bless you
I have used a similar method to pay off debt. Am so glad to find out it has a name. I always felt guilty having to use the cedit card again. Now I learn that there is no place for that. Thank you Ma'am.
You’re welcome! And thank you for watching
Miss Christy, thanks for all you do. Please look at this Car amortization schedule. What is different between Velocity and this.
Auto Loan Calculator Results
Loan Amount: $28,000.00
Monthly Principal & Interest: $431.72
Monthly Extra Payment: $1,575.00
Total Monthly Payment:
$2,006.72
Total # Of Payments: 15
Start Date: Jun, 2023
Payoff Date: Aug, 2024
Down Payment: $0.00
Trade In Value: $0.00
Sales Tax: $0.00
Other Fee: $0.00
Total Interest Paid: $627.94
Total of All Costs:
$28,627.94
Umm $2006.72x 15 payments equals $30,100.80 so that would be $2100.80 interest!
Maybe she could build an online calculator that compares this method with just paying down debt with excess cash each month( or investing the excess cash somewhere else ).
I made one for myself in Sheets, calculated actual daily averages and balances, figured interest cost and extrapolated cash flow over the life of the current debt and the VB Vehicle, the only way this saves you any money is if you have a teaser 0% Interest rate for long enough that you can get out from under the debt before they charge you, otherwise you still end up paying interest. I used my total debt (20k at the time) and by the time I made the final payment using both strategies the difference between the balances was less than five dollars. The only way I was able to get the model to output savings is by using a hypothetical balance transfer into a 0% interest account and you're basically cash flowing paying off your debt. That was the best way I could figure to test the theories and it was the most realistic I could possibly make it.
It's actually pretty clear in her video if you ignore the words and just look at the white board. She says there is $1575 cash flow, she uses 6 months in the video, 1,575*6 is 9,450. Just put the $1,575 per month on the car for 6 months and you accomplish the same thing with less interest paid. Maybe I should make a RUclips video breaking it down.
She and people like her would NEVER do that because its easier to sell "Velocity Banking" without the side by side comparisons. The comparison would show minimal net benefit between "velocity banking" and the other methods.
Don’t forget a few of the basic reasons for doing this (no particular order and I’m sure there are many other valid reasons): (1) building credit, (2) lowering interest on unpaid balances, (3) getting “Cash Back” on those types of credit cards, (4) satisfying the credit card monthly payment without actually making the “normal” payment (free up that amount in cash flow), (5) reserving cash flow within the line of increased credit (for emergencies). Otherwise, using cash leaves you with no cash flow, whereas paying down credit card balance keeps the cash flow that’s otherwise lost in a payment. Reserving cash flow while at the same time paying down debt and building credit is the key here. Smart instructor!
Exactly!
What are you both talking about? 1) Your build credit by paying bills on time, getting higher credit limits so debt to utilization rations are lower, multiple types of loans, age of credit, and inquires. So no this does not build credit and will actually lower your credit score as borrowing 10k on credit card will ruin your debt to utilization ratio 2) You are paying more interest with this method 150 dollars interest if you did nothing but pay normally for 6 months, $ 210.50 by her method with 2 missing months of interest as well. Better off just taking extra and paying to car loan directly which is also dumb as 3.5% interest is extremly low. 3 month CDs on fidelity are paying 5.3% so you would be making 2.8% if you invested extra in a CD. Better yet pay the home loan first as it's 6.25% so at least you save .95% 3) You don't get cash back on CC loans if she wanted cash back she would have to buy the car with the CC. 4) You decreased cash flow by tying up your available credit on CC, paying off a car loan doesn't give you access to more money as you don't build equity on a car loan. She could build equity on the home though if she paid that which does have a higher interest rate and makes sense to pay normally with extra cash not CC loan at 21%
@@MichaelFrancisco973 Preach it man. They could pay the car off in 14 months by just sending the cash flow in on the principal every month. This makes no sense.
@@MichaelFrancisco973 curious to see the replies to this
It seems very complicated. And one emergency that needs cash and the castle crumbles
This works! We've been at it a year and we started with a cash flow of only $50!
I don’t know if anyone pointed this out , but there was an error in your math at month 5. It appears that you added month expenses, calculated interest then added month 5 expense without subtracting month 5 income. This becomes evident as your LOC balance increases from $962.90 to $1850.40. The balance should have been satisfied with the month 5 income.
Facts!
I caught that as well. Simple mistake, we all make them. She would go back, watch it, and laugh at herself, I'm sure.
@@Paulk305 As I did..also proves velocity works even faster🤷🏻♀️
Yeah my OCD is KILLING ME now that we have made it to EXPMO2...
Error at the beginning. Cash flow should be 575.00 not 1575.00
The only question I have is how you were able to put the car loan on a credit card! I thought it had to be debit or from a checking account?
My credit card allows for cash advances. I assumed that was how she did it. Hopefully she is able to answer for sure.
I think Vickie is right. The credit card is used as a cash advance. She doesn't include the fees associated with cash advances, which can be quite expensive.
My cash advance are 3-4% , and end up being way less than the interest if I pay amortized interest payments
You could use convenience checks. If you have a PLOC .. you don’t have to worry. You can put any loan into a PLOC. Thank you for watching.
@@transformwithvickie I do have cash advances available on my cc, but the interest is absolutely ridiculous. But in another one of her videos, unless it was this one, she talks about some checks you can get for pulling $ off your credit card I guess those are convenience checks and maybe I’ll try calling or going inside and asking about them and if they could send me some. Also thinking about doing a my chase loan on one of my 0% interest cards. Chase let’s you borrow $ against your available credit, and they don’t charge you like they do for a cash advance and it’s available immediately in your checking account so I think I’ll try those things and see about paying my car down with that $
This velocity stuff is nothing more than throwing your cash flow towards your loan priciple every month! No magic here folks!
The only difference is you can access the LoC if you need cash.
So just get a credit card for emergencies?
I don't understand.this velocity hype!?! Its silly.
Shouldn't the car loan after the 6 months actually be lower than 18k? Wasn't that getting paid down as part of the expenses? Or did I miss something.
The car payment only comes off the monthly expenses the times that the $4,000.00 is put in, otherwise it is part off the monthly expenses
But yes it will be lower than the $18k because you made 6 payments during that time
@@anthonyhayes3166 You are correct. It goes down to 15,000.00
Was thinking the same thing. It should be decreasing as well, if it comes out of the monthly eexpenses
I was wondering about this as well. Thought maybe the car loan was on hold because she pain $10,000 on it, so it's like prepaid possibly?? Just a thought. I was curious so I came to the comments.
Can we see an example without all of the income going to the credit card, because there are some expenses that you cannot put on a card, such as a mortgage?
I can understand chunking a 30-year mortgage where the first 10 years is mostly interest, but I don't see any benefit for such a short loan. If you just apply that $1575/m cash flow directly to the auto loan, you're paying $2175/m towards it. Payoff is 14 months and you still have the full $15k LOC available for any emergencies.
I just subscribed. Your videos are excellent 👍. Velocity banking works. Keep sharing and helping folks with the paradigm shift.
Thank you so much for your kind words and thank you for watching!
Six months of strictly putting a minimum of $1,575 extra ($4k - $2,425) toward a car payment would yield zero interest expenses from a credit card loan and remove $9,450 off the vehicle’s loan principle. The first month’s interest payment alone is $172. Even if all six interest payments was $80 (average), that would come out to $12 a month extra in your pocket than you would have if you just placed ever extra penny toward the principle.
The second month’s interest payment is $135. The third month’s interest payment is $109. The fourth month’s interest payment is $84. The fifth month’s interest payment is $58.
You’re paying $556 in interest payments by the fifth month. You have lost $6 by the fifth month plus whatever the total ingest payment is on the sixth month.
How would you use a credit card to make a car payment? Cash Advance? If so the borrowed money is going to be at a higher interest rate.
Then don’t do it. You have to be strategic. Find a LOC without any fees.
@@VanntasticFinances Can you elaborate on that comment please? What else constitutes an LOC?
@@seangarnham7834 heloc or ploc
If you just added the existing $1575 "cash flow" to the $600 car payment, you'd then be paying $2175 towards the balance every month. If we estimate the car loan interest on the full $10,000 over three months, that's $29.17 monthly or $57.51 in 3 months vs the $287 calculated here. All this is is just accelerating debt payment using all my excess "cash flow" and you can't "create" extra money to pay down debt by taking out another debt, especially one with a much higher interest rate.
She needs to run this scenario from start to finish on a spreadsheet to see the true (entire) picture. You can't take 3.50% debt and convert that to 21% debt and claim to be able to pay the debt off sooner and save money. It's a mathematical certainty - with a given income, and principal and interest to be paid, increasing the interest will add to the overall cost.
Please get your own You Tube channel and post there, stop trying to hijack her method to help others
I don’t follow the logic here… the real reason this pays down the loan is 16 months is the $1575/mo cash flow is being added to the usual $600/mo car payment. You could do the same by paying directly and avoiding any additional interest burden from the credit card simply by making larger payments ($1575 + $600 = $2175) and $28000/$2175 = 13 months albeit some of that $600 includes interest so it’s going to take a bit more than 13 months. Point is avoid the extra CC interest and accomplish the same a bit quicker. Cash flow is king.
You are forgetting about the insane interest that is still being charged on the monthly payment on the car loan which is an amortized loan, meaning the vast majority of each monthly payment is going to interest on that loan rather than paying down the principal. Your math above is not adding all the interest.
And the credit card isn’t going to have loads of interest? Chances are it will have much higher interest given that many cc’s are at least in teens vs single digits for car loans. The reason you pay either down quicker is because you apply your monthly cashflow to the payment which brings down the principal quicker.
So, I have two questions about this. Why wouldn't you just use the 1525 per month cash flow to pay towards the car loan every month? Why do you need to use the line of credit every month and pay interest on all of your expenses instead of just the loan itself. And also, if you were to follow the logic in here at the end of the cycle of paying off the 10K and then putting another 10k on the Credit line towards the car loan. The overall car loan amount would be less than $8000 because you've been paying for the last X amount of months toward the loan using the credit card. I also don't know many car loan companies that let their customers use credit cards to make payments. The numbers work but it just seems like an awful lot of reworking your budget and timing everything to start putting ALL of your bills on this every month. Also, your paying 3.5% interest on remaining car loan with money thats also being charged 21% interest. I might be wrong here but thats how I see it.
Why would anyone willingly use up every dime they have in the bank for that when they have a $15k line of credit to pay it down? Line of credit is easier to pay over time than your car....if your late on the car it gets repo'd. Rather deal with a credit card. Plus if you pay it only using what you have left in your pocket it will take A LOT longer to pay off versus doing it this way.
@@shannonsmiley6436 ❤
Brings down the cost of the car and interest on the car. Very complicated. I bought my car through credit Union save over $1,000.
@@shannonsmiley6436 but you are paying 30%interest on every bit of money you make vs what you bought the car for. Your nuts.
You lose your cash flow when you put into loan. A LINE allows you access to your cash when needed. Thanks for watching
Bullshit! A 30k car cost 30k there’s only one way to pay that. A 30k balance requires 30k on payments. If you can do that in a 12-16 month timeframe you have an extra 30k a year essentially! If you don’t have an extra 30 k you won’t be able to pay it!
You would still need go be paying your car payment the month after you made a $10k payment so your monthly expenses would jump back
I love this video, but had a question. For mortgages and car payment (or certain payments) you can’t use your credit card to pay, so how would you go about paying that with your credit card?
HELOC or PLOC
@@BloodySoup74 whats a PLOC please?
@@sidshri6080 Personal line of credit.
@@sidshri6080personal line of credit ploc
@@sidshri6080look it up and quit being lazy they gave you the brick you have to build your own knowledge
Please do someone explain to me the following question: how it really works. One takes $10k from LOC and put them into a mortgage lets say. That LOC is -$10000. One puts $4k and it becomes -6000+ the inferest and basically operates with those $4k. The balance is going to zero with the amount of the cash flow...i just dont get it how it works fast.
It's easy when you make more than your neccessary bills. I make $9.00 an hour and my mortgage just went up another $200 a month. I'll be impressed when you can work the numbers for someone like me. Not someone who makes 3X what I do. Can't pay it if you don't have it.
Love these videos, is there one showing how to pay off a car loan without a PLOC or HELOC?
Didn’t the card have $300 not $3000? There is $300 on the board but when added the total added $3000
10,000+300 = 10300 NOT 13000 But you have a great idea and explain it fantastically
>>>>>> Please realize that this only works IF you own a home with enough equity to work with AND you qualify for a HELOC that typically only allows a max of 75 to 80% of the equity available. You would have to apply for the HELOC (a credit hit) AND pay for an appriasal ($500+?). IF they say your home is worth $20,000 more than your mortgage balance, THEN your HELOC limit is likely to be only $15k - $16k, leaving a cusion of equity. Not all HELOCs come with a "debit card" to pay your expenses out of. Otherwise, you'll want to withdraw chunks of cash ($600/wk ?) every time you need to make an expense payment (groceries, gas, etc.). But, if all is good, you MAY be able to deduct the interest paid on the HELOC along with your first mortgage interest come tax time, a small bonus.
Thank you for taking your time to walk me through this. It makes so much sense to me
Glad it was helpful!
Thank you! Man, lucky client with only 1,000 in living expenses. wow
This is very complex for someone just trying to pay down a car loan. Why involve high interest credit cards when you have Xtra cash coming in??
If she was paying $600/m and had $1575/m cash flow like is stated in video, she would pay off $34000 in 16 months. This would more than pay off $28000 car loan even with interest @3.5% factored.
Velocity banking works only in certain situations and this lady doesn't seem to understand the difference. She leaves out variables and comparisons when it comes to the math.
And for some reason she keeps on confusing the entire youtube community with her misleading videos
All of that $600 per month isn’t principal only. You gotta look at the amortization schedule. By chunking $10,000 to the car changes the amortization schedule and makes her $600 a month payment go towards more principal and less interest. Changes the whole schedule
How can you pay off your mortgage from credit card? It is not what banks allow
Instead, just apply the free cash flow to your auto balance and you would have already paid off $18,900 after 12 months not including your monthly principle and interest on the car loan. And, still have the line of credit for emergencies...It's like one is spinning the wheels in the mud with this example to cover the same distance as on dry land if you just used the monthly cash flow towards the auto balance. White board that!
Exactly!
By directing her residual monthly income of $1575 to her car loan as a principal monthly payment, she will pay her auto loan faster and save on interest...not to mention, she would NOT obligate herself to make more than her minimum payment.
Plus, she would retain $15,000 in cash flow via her LOC for emergencies.
Velocity banking may work for people with little to residual monthly income, but it is not the best option for this case study.
I noticed that you used the balance on the car at month 7 of 18000... when you have been making payments on the car for 6 months prior... so that balance would be lower... but not by much ... still a positive :) Thank you for your teachings
If a line of credit is 15K, why not to apply it to a car loan all 15K?
It makes no sense to pay down the 3.5% car loan with a 21% line of credit. She should just make additional payments on the car loan, or better yet build up her emergency cash reserve so that she wouldn't need to draw on that expensive line of credit in an emergency.
She explains it, but the 21% interest doesn't get charged by the end of everything, so you're not actually paying that amount.
Good answer! Thank you
And lose all of the cash flow? No way!
@@VanntasticFinances how are you not losing the cash flow anyway? In your example, the entire $4000 gets paid to the line of credit every month so I guess the cash flow is gone right? If you just use the cash flow to pay extra on the car loan, then you have the whole line of credit to fall back on if necessary. Using your example, you have zero extra cash flow free and only a third of the LOC to rely on if something comes up. Not to mention, you actually pay the loan off a few months faster by just sending the cash flow in as an extra principal payment every month rather than transferring the debt first.
I agree Norman.
I think a better alternative would be to use her cash flow of $1575 as monthly principal payments to her car loan. This would allow her to pay the loan off quicker while retaining access to her $15,000 LOC for emergencies. Plus, she'd have the option to stop applying the excess payments to her car loan without penalty if she experiences an economic hardship. But if she uses her LOC to pay down her car loan, she has obligated herself to ANOTHER line of debt. Also, if she experiences a hardship, she would only default on one loan instead of two.
Velocity banking does not appear to be the best option for this case study.
good strategy for those who have no cash flow but for someone with $1500 cash flow the same thing could be accomplished just using it to pay on car. i figure 1 month longer for this result and lot less complicated!!!!
This is highly flawed. The total interest cost on the car loan based on the amortization amount of $600/month at 3.5% that would see the full loan of $28K paid in 51 months = $2,142. Using her method where $28K @ 3.5% is paid in chunks of $10K @ 21% would cost about $950 total (the car company is adding interest on capital for the unpaid amount, the capital is accruing). If the person paid $2,175/month all on the car loan, the loan would be paid off in 14 months and cost $581 in interest total. I mean no disrespect to the instructor or people who wish to follow this method. You need to drop the scenarios in an excel amortization schedule to see for yourself. I don't know the full terms of the loans, but if possible, I would double down on my mortgage payments at 6.25%/interest per annum before paying off a bargain rate of 3.5%. Heck, I would even invest my excess cash flow in a tax-free money market ETF, income certificate or deposit account. Plenty of high yield stuff out there.
😂😂😂😂… Ppl like you are keeping the video VIRAL! Thank you so much!
I'm going to test this. I will let you know.
Where did the extra 1K come from. 4k-1k-2425= 575. You have $1575. Did I miss something?
Yea I got so caught up with this calculation that I lost track
Question about the car loan. Since you can only make partial chunk payments on the loan, is the regular car payment with the remaining balance also still included in the monthly expenses?
Actually what I am confused about. The car loan bill will still be due so now you have an additional bill monthly, right?
@@MsALCrespo that’s what I was thinking. Initial payment satisfies month 1 but in month 2 you have to make the normal car payment right? So how does this pay it off sooner?
Awsome advise. 😊 thank you
I respect what your doing. But how about we save all your math and just make it a simple equation. Take her available cash flow each month and take it times 6 (number of months). That is over 10000 dollars. It’s called the snow ball procedure. No credit card needed.
@Nicholas Collins,
Then you have no cash flow available. 😺
It's not about math only but rules.
Simply start paying your Cash Flow every month. This would increase the cash flow to (1575+600 = 2175). With $2175 each monthly payment the loan will be paid in less than 12 months. Replacing a low interest rate with a high interest rate will never make the math right.
Question: How would I pay off line of credit from bank?
Cash is King.
Not sure why an expensive detour was taken when a straight route was available, faster and cheaper.
Just take the monthly cash flow of $1575 and apply it directly to the principal. You would pay the car off faster, with less interest AND not obligate yourself to a THIRD debt! Plus, you would retain your ENTIRE $15,000 LOC to use for emergencies.
Why use credit at a HIGHER interest rate to pay another creditor at a lower interest rate when you have the cash flow to pay cash??? Remember, you still have access to your LOC for emergencies...
Using velocity banking in this case study is like a person living in New York and traveling to Nebraska to get to New Jersey...only makes sense if its the only route
Agreed!!! Velocity banking seems to work better for people with little to no cashflow, and who have or can get a LOC. It doesn't seem to be the best option for this person.
Month 7 there was a mistake. $300 + $10,000 = $10,300 not $13,000. Also you're not putting any money on the car loan every month which means your expenses would be $600 a month less or you need to also reduce your car balance by $600 a month with exception of the first month where you put the $10,000 down.
I think this way-- If the car loan was 0% interest rate, would you use your 22%LOC to satisfy it? No way. At what rate would you draw the line?
How did you get the cashflow amount S4000 - $1000/2425 = $3425 = $575 ?
4,000 -3425=575
$1000 is part of the $2425. This is the amount you don't have to pay by direct debit so $4000 - 2425 = $1575
Ok, i get it, but where in here did she start paying the car payment again. After month 1 the lender will be expecting $600. No lender will let you go without paying because you sent them $10k. Not for 6 months, the car would've been repossessed. Did i miss something, i just dont see where the car payment was taken care of in month 2 and beyond. If the 600 is part of the $2425, then in month 7 the car balance wouldn't $18k. I must have missed it or I lack understandingy
Good info, math is off a couple times but you get the point across
It’s very simple make 100k a year so be in the top 15% percentile in American income and you can buy a super small or used car. With interest rates from the 90’s. Making up numbers is easy
In month 7, you added 3,000 but wrote 300 so it temporarily got a bit confusing. I viewed it again and now understand.
I missed something. If you pay your paycheck for the LOC, where does the money come to pay expenses ?
The LOC!😁
How many months were on that original car loan? How long would it have taken to pay it off the regular way vs how long did it get paid off in this example?
It was originally 72 months. Thank you for watching.
using a loan calculator, the original loan amount was $45,000. If you would have paid the loan payment ($600) + free cash flow ($1575) each month, you would have paid it off in 22 months.
Just apply the $1575 excess cash flow to the auto loan each month if you want to pay it off early. Better yet, at a 3.5% interest rate, you’re better off putting that excess cash into a high yield savings account right now that is earning over 4%. She gives terrible advice.
If you have zero credit card balance to begin with and a positive cash flow, why even use the credit card? Why not make extra payments of 1500 each month and just use the credit card as a safety net? The difference in finance charges between the credit card and the car loan would be negligible.
This kind of stuff makes more sense if you are trying to save on mortgage interest, or trying to pay down a credit card.
Where is part 2?!
I don't understand it, you paid interest of $325.3 on the LOC in the first 4 months and only saved $175($10,000 * 3.5% / (6/12) ) in the total 6 months on the car loan? wouldn't it have been better to just pay the $1575 directly on the car loan? or maybe go for the mortgage first as it's higher rate?
Please explain this to me in simple terms as I find it difficult to follow and understand why this really helps rather than just pay all the excess to the car loan.
you would think paying the mortgage off first would be ideal. because of high interest rate
@@JamesBrooks-zz8qx I agree, and you'd not even need to use the LOC.
Maybe I'm just not clever enough 🤔
While the LOC uses the simple interest method, the car loan doesn't. Car loans are an amortized loan which means that the first few years of the loan payments are primarily interest. So the calculations you used for the car loan interest are not correct.
Am I right that the 4000.00 deposit is done weekly from the persons pay check, not in 1 deposit, beginning of month
What about the interest that would be accumulated over the months on the other 18k that is left on the car loan? You would have to take that interest into account each month as well. Or am I misunderstanding?
another way you can just put all the cash flow and pay on the principle of the car loan every month it would be the same thing less complicated.
My auto drafts, are you saying change them to the credit card. Will Social security that is paid to my checking account will they allow that payment to go to a credit card
Guys! The line of credit is simple. Not complicated like a home loan or car loan. You get freed up from your debts faster, 6 months to a year rather than 60months for a car loan. So in a year you can buy another car if you want.? Or anything else. Plus she is saving you way more money.
You’re not calculating the crushing additional monthly payment on the credit card @21% interest lol
Every time you deposit your paycheck, your satisfying that monthly payment.
If you pay closer attention, she’s adding the 21% interest every month.
You have to watch the videos a few times with different scenarios and you’ll have a better understanding of how this method works
@@Silvi79 its not every month. the 21% interest is yearly then divided by the total days in the year getting your daily interest rate that you times by your loan balance.
I want to pay my auto loan with my credit lines, but my auto loan company is restricting me from doing so. The only way to use a credit car to pay my auto loan is to do it like a cash advance. The CC company won’t approve the amount of my auto loan as cash advance - only a portion of it. And if they do it, it is 30% interest!
Find a credit union or a bank that will give you a Line of Credit. It's a bit different than a credit card.
Doesn’t just paying the extra cash flow (1575 x 6 = 9,450) as extra principal on the car loan each month get you a very similar result?
Yes, but doing it the “traditional” way leaves you with little or no cash flow. Cash is King!
@@dougbullis8462 Still confused because the non-traditional way leaves us with no cash flow either because all the cash flow is getting put into the credit card each month. The cash is not available in that scenario too.
@@robertcorbin2749 cash flow will be in the form of available credit on the card (liquid cash if needed for emergencies). Otherwise, just paying the 1575 towards a loan is simply gone and cash flow isn’t realized.
@@dougbullis8462 but in the example in this video the credit card had a zero balance,so the liquid cash credit is there,no?
@@robertcorbin2749 if that’s the case, then, yes the available credit would be available cash flow. Correct.
Think, people! A line of credit gives the borrower a cushion against uncertainty. This cushion comes at a price. You will have to use it & pay interest or the bank will take it away. The bank is there to make money and if they don't make money off interest they will turn that line of credit off. So if you're using that line of credit & paying interest, you would be better off not using velocity banking, not pay any interest, and instead use the money that was for interest to pay down the principal. There is no free lunch. Ever.
😂😂..I’ve had my lines for close to 15 years, and gaining more, but ok. Thanks for watching!
@@VanntasticFinances Yes, I don't doubt that. But you pay interest because those lines aren't free. I don't pay interest because I don't need any lines. I hold the real stuff: money & investments.
@@marcusantimony7535 you pay a lot more fees through investments and cash. You just aren’t counting those costs. Thanks for watching!
@@VanntasticFinances Thank you but you for risk-free wealth building I'll follow Dave Ramsey.
Different strokes for different folks. I am not mad at you.
if you take 10 months to pay off two 10000 LOC using velocity banking, you are ahead of 3 months than simply paying 1575 towards principle for car loan. 1575 times 10 = 15750, vs 20000. Please let me know if this is right. Also I think the person should have 6 months of monthly expenses stored somewhere, if emergency arise.
I still don’t understand why someone would take out a 10% HELOC to pay out a 3% mortgage.
Over the life of that "3%" loan you will pay OVER 50% in interest! Your loan is amortized over 15-30yrs. You are NOT paying 3%. Lines of credit charge you simply interest and you only pay on the average daily balance which will not even be close to what you pay on the mortgage over its lifetime. She mentions this exact question at 18:53 in the video.
@@kenwheeler1327 THANK YOU!!!
I don’t understand how you’re using $4k to pay when you only can use the cash flow amount of $1575.
Thank You For Existing.
She's like my math teacher would always put me to sleep. All I understood was put all your cash flow into a credit card that you will be using for all your expenses, and it will reduce dramatically...em I missing something, not sure.
Yes, you are missing something. Pay closer attn.
😂😂🤣🤣😁😁😂😂🤣🤣
My only question is, what about the following 5 months of $600 car payments? Is the entire 6 months of payments satisfied by paying it down by $10k month 1!
This crap makes no sense. Her 10k removed from car loan at 3.5% for 1 year interest would be 10000 x .035 = 350 dollars / 2 (for 6 months) = 150 dollars interest if you did nothing for 6 months. Your math is also wrong but even with your interest numbers 88+80+37.5= 205.5 which is more than 150 and you are missing 2 months interest from this calculation. Why would anyone do this?
I believe you forgot to take the $600 car payment out of the expenses further down.
what about free cash 1575 + 600 loan payment = 2175 x 6 = 13,050. loan amt 28000 - 13050 = 14,950 new bal after 6 months - 13050 = 1900 new bal after 12 months done in 13 months with final payment. did I miss something here ? 3.5 % on the loan maybe adds a little more on the balance.
Would've been great to see the comparison if she used her CF to pay off the car in 2 years, how much interest would she have paid? How much interest paying it off in the same 2 years with Velocity Banking?
Can you please write bigger on the white board? Other than that, great job and thank you for doing this
🤣🤣🤣
So the the whole 6 months that you are paying on the 10,000.00, there’s nothing being done with the remaining 18,000.00 at that point.
My understanding is while you are paying down the $10,000 credit card loan. You are still paying the $600 per month on the car. This would reduce the $18,000 balance for the second $10,000 infusion. Very cool.
If you have bad credit, how do you get a line of credit
How do you use a credit card to pay down a car loan?
Okay I'm sorry but she seems drunk. 10,000.00 + 300.00 = 10,300.00 NOT 13,000. Then she figures the interest on that 13k and its way to high. Also during the 1st 10k moved to the line of credit the car payment went down to 15k. 28.000 - 10,000=18k. Then there were 5 payments of $600.00 which brought that balance to 15k. 15,000 - 10,000 = 5k. But video ends abruptly so we don't know the rest.
Did I miss the bit were she explained this better than staying on the 3.5% Car Loan?
@Craig Rider,
Interest was 3.5% because, as most car purchases have presently 'joining the club', the loan was for 7 YEARS @ $600 per month.
So, whatever the original purchase price of the car, I'm pretty sure it wasn't $50,400!
That's how people get fooled into thinking it's a great deal__only looking at the % of interest is costing you TENS OF THOUSANDS! Whereas, that money would now go to paying off her mortgage!
I hope that clarifies. 🙏😇✨💫🌱🌿🌻🐝🌳🌎💖🙌😺
She's only running the numbers based on her method. I'm going to run them both ways - 1) using the LOC and 2) just paying the car loan.
If it were me, I'd be tackling the 6.25% loan first.
I’m soo lost, this video makes absolutely no sense to me
Research this topic and then come back and rewatch
Because the video skips from point 18:18 - 18:34 when she is figuring the interest , then the video cuts to when she has already added that in, and starts adding and subtracting the monthly expenses again. The 4,000 says P/R and was no explanation of what that was. The $119 is the interest on the card. She took the high balance and low balance, divided by 2, then times the interest rate, and then divided that total by 365 days, and the interest was $3.97 day, then she times $3.97 x 30 days for the monthly interest onnthe card, and came up with $119 and added that. Then she put the $4,000 income as a payment back onto the debt and continued on from there. It would also help if she put parenthesis around what are the debt numbers and plus signs as what are credit numbers so it won't be confusing.
That’s because you would pay the car off in a little less that 13 1/2 months if you just added that 1575 extra cash to your car payment every month with out all the extra bs.
Blake, it was hard for me and This, math, is my fortier! It was b 😀cause of initial editing. Skip month 1 and 2. Pick it up on month 3. Thhe process is the sam for any given month. So even the numbers don't matter. Just focus in on the process. Example. Debt created on cc. Income source going on cc and Not into checking acct. Subtract income from cc debt. Add the ttl monthly expenses to cc again. Now here is where she simply gives a template for figuring in avg daily balance. Now if its too confusing, just add in the previous month interest.
So total monthly exp's plus interest(prev statement's) plus cc debt is the total cc debt.
It just keeps getting smaller because your chunking it down by depositing monthly income into your cc instead of a bank.
It's genius! Reread saaaaallllloooowwwly the above. Use a pencil and pad. And start number(i recommend 10,000) to start. Use Your monthly income and total monthly debt to see how it works.
Happy calcullating. 👍😄
Wait!...
Uh, I spoke too soon. It occurred to me that what she is saying as far as procedure, step by step, may not be entirely complete. Why?
Good question. As far as I know, many years gone by, a mortgage co will Not accept CC payment. Too many variables(loose legal ends). I don't know about the last 5 or 6 years. Much has change. Look into it. May even need a 3rd party for it. Too many ????
It makes no sense because you’re basically paying banks to make payments. Unless you like paying for the Chase skyscrapers, this is a bad idea
I am trying to picture this model with 4 credit cards and one HELOC at 7.25%. Your example is with one single credit card.
its not 18000 anymore after 6 months at 3.5% interest, if she pays 600/month for 5 months, so it shud be even faster
It makes a lot of sense. I'm just wondering if it matters how much cost you use your LOC for. Like what if you have a PLOC for $20k? Would you use the whole $20k and go thru this process? Or would you do it in $10k increments so the interest rate is not so high?
My only question is the starting point. How is $4000 used when the expenses come out of that? Shouldn’t it start with the cash flow amount? I can’t seem to get that straight but I think I understand the process after that. 😊
After you put in your initial deposit into the line of credit, then pay out your expenses throughout the month. The cash flow will stay in the line of credit paying down the balance.
But I thought you said some payments need to stay in the bank. Why can’t I get this? I’m an accountant 🤣
If you’re using a cc…yes…loan payments/other cc payments stay in bank. Only cash flow and other chargeable items go into cc.
If she has 1000 + 2425 in expenses that equals 3425. 4000 - 3425 is 575 not 1575!
@@mlewelkin the video she said the 2425 is a total of the living expenses and debt. She says it about twice. Hope that helps
How do you deal with the credit utilization?
This won’t work for me because my loc and my car loan are both with capital 1, they won’t let you pay a car loan with one of their credit cards.😢. Do some math when you have a situation like that. How would that work?
cashflow should be $575?
@@interestingfacts4943 I believe the $1000 was just specifying her non-debt expenses. Groceries, gas, etc.
Maybe I’m confused but wouldn’t you still need to pay the $600 car payment every month?
That was included in the £2425 exp figure, (1000 living, 600 car, 825 home presumably)
The first month, no- since the bulk payment of $10,000 satisfies that month's payment. But every month after that, yes you're right. In the video, she does show the change in the second month on the whiteboard. The expenses go back up to $2425.
Exactly! Thank you!
Right. But after month 6 going into month 7, she goes back to the 18,000 dollar car loan. I might be confused as well because shouldn’t the car loan be down to 14,400 if we still paying the 600 dollars with the monthly expenses ? And another 10,000 dollar payment is from where? I thought the loan was only for 15K?
@@josephking6944 I believe she is paying it off $10K at a time with the $15K line of credit.
Did the monthly expenses include a car payment, after the 10k. How on month 7 did the expenses go down from 2425 to 1825.?
But when were the monthly expenses paid?