How to Pay Off Your Car Loan Faster (it's NOT Velocity Banking)
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- Опубликовано: 6 окт 2023
- Learn the fastest, cheapest way to pay off a car loan faster. Velocity Banking strategy VS. payoff car loan directly. Expert shows how to think about paying down any loan.... mortgages, car loans, credit card debt, personal loans. No surprise, Velocity Banking is NOT the best way to do it. Finance expert proves it and shows his math.
This video is meant for educational purposes only and is NOT FINANCIAL ADVICE.
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Your host in this video has been the CFO of several software companies and offers a lifetime of business experience to his audience. Will has an undergraduate degree in Economics, an MBA in finance from Cornell University, earned the CFA charter (Chartered Financial Analyst), and has worked as an equity research analyst at top Wall Street firms in addition to his experience running entrepreneurial companies.
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#velocitybanking #payoffdebt #getoutofdebt #williamlee
The way to get rid of debt is to increase your cash flow, and pay down the debts. Thank you for the information.
Just put extra on principal , it will be paid off slowly steadily.
Yup!!! and you won't have a higher interest rate! why would you want a higher interest rate!! makes no sense!
I'm paying down my car right now. I just divide the total amt due by the number of months that I want to finish paying it off and add the interest that I calculated. I recalculate every month as I get closer to my target date. I do keep a PLOC of $36K on-hand though for medical or natural-disaster emergencies
Show of hands…. Who in the hell is living off of $1286 a month today???? Who’s making a $286 a month car payment?????? A Pontiac cost more than that in the 80s.
If i didn't have my car loan my monthly expenses would be about 1200. I bought my car mid 2022 and i pay 320 per month for a base model camaro that had 45k miles when i got it. For reference i live in Hagerstown, MD and pay 750 per month for a two bedroom. I'd say it's pretty close.
And who is paying 2.5% these days
I’m lost😞 I listened to this over and over and still don’t understand it 🤔 don’t talk about me y’all 😂😂😂
I knew he knew what he was doing when he pulled out the Excel spreadsheet
I've used 0% interest credit cards to buy cars and to pay down mortgage debt. If you have the income to support it, it can quickly pay off a home loan. Not many people have the cashflow to do this. In my case I have paid off rental properties that generate cash flow in addition to my IT job which pays reasonably well.
Most auto loans don't allow you to use credit cards to pay off loans. How did this work for you?
@@Greg-lg3cpI got lucky with a car loan of mine. The system allowed me to use a credit card and I got 1% back for like 6 months. I use my credit card as a 0 balance account though.
@@Greg-lg3cp I have done this with 0% balance transfer offers from Discover. Discover will send a check to your loan provider which and does not go through normal credit card processing which is why it works. You just have to be careful to only transfer as much as you can reasonably pay off in the promo time. If you don't pay off the 0% loan before the promo time ends, you may wind up at a higher rate than the original car loan.
Would like to know as well.
@@Greg-lg3cp he bought the car with the credit card and then paid the credit card with 0% interest
Using a LOC with a higher interest rate and going through the whole rigmarole of using the LOC like a checking account doesn't make any sense when you can just take the extra cash flow and use it to make principle payments directly to the lender at a lower interest rate.
I used Velocity Banking to pay off medical debt and 2 car loans in 18 months. I however used a HELOC...not a PLOC...for half the interest rate. Another draw to velocity banking is people are just that...people. The draw to stop paying all of your monthly cash flow to your loans on your own is real. "Its ok to skip this month" makes the whole thing bust. Velocity forced me to stick with it. I will do Velocity with a HELOC any day since the interest is way cheaper than in this 11% comparison.
You forgot to factor in the base car payments into your schedules in scenario 2, 3, and 4 of $286. The total payment with extra cash flow would be $1619 + $286 = $1905. Now this still means scenario #2 still comes out the winner because of the lower interest. However by factoring this into the velocity banking scenario expenses are now $1000 because of no car payment. This means scenario #4 using velocity banking only costs around $150 more vs. scenario #2. I assumed the first paycheck is on day 1 and weekly payments thereafter. Now that leads to the question as to what interest rate on the PLOC or HELOC would it actually make sense to do velocity banking over just making extra payments. That turns out to be around 5.9% as the break even point if the car loan interest is 2.5%. Very interesting to me and justifies why in some cases it makes sense to do velocity banking over just making extra payments. I punched in the numbers for my own car loan which is at 5.99% whereas my HELOC is 7.7%, I get paid the 1st of the month and monthly. If I factor in the same cashflow of $1619 + my own car payment which is $557.25 based on my pay cheque going straight against the HELOC I save $174.04 using velocity banking over just making extra car payments. Month 10 ends up being my pay off date. So velocity banking is not just a gimmick and can make sense in some cases.
I have an LOC with $80K balance at 8.5%. I pay it down at $2,000 a month, which will take me 4 years and $13,000 in interest. I have several rental properties producing $8,000 a month. My mortgage payments are $2,100 plus the $2,000 LOC payment, so $4,100 total monthly expenses.
As of today I started velocity banking using that rental income of $8,000 each month. Now, the rental income satisfies the $2,000 LOC payment (cashflow bump), the time to zero balance on the LOC is 13 months and the interest is $3,000. So, I save nearly 3 years of payments and $10,000 in interest. It will certainly work for me and I'm thrilled I found Christy Vann's channel...if that's who William Lee is referring to.
One thing that is vastly different about velocity banking and using your cashflow to make extra payments, is the ability to withdraw funds back out if necessary. That's what has kept me from making massive additional principal payments on mortgages. I view the LOC as a place to park my money and offset interest costs. I feel like I'm using the bank's loan against them.
He states below in a comment that the car payment of $286 are paid from the $1,619 (i.e. total expenses are 1,572 = 1,286 + 286), so his calculations are correct.
@@michaelking42 Take out an LOC and don't touch it and still make extra payments on the mortgage (probably at a lower rate). He mentions that in the video (about 7 and a half minutes in). Then you have the entire LOC for an emergency fund.
@@davidgavney6711 Thanks Dave, I've done the spreadsheets to analyze the differences. I already had an $80K balance on the LOC, paying it back at $2K a month. Doing VB will save me 4 years of payments and $10K in interest on the LOC. Once paid down I'll take out $50K to drop on one of my mortgages, then repeat the cycle. Having an LOC certainly frees up the thought process that you need to have cash in the bank for emergencies. The only real emergency cash is the cash under your mattress.
PREACH😂
With velocity banking, cash flow typically increases from month to month primarily because:
1. Expenses decrease
2. The amount paid in interest also decreases (bc it’s paid on the average daily balance).
Without seeing how these impact the balance each month, your example falls short.
Did you not watch the video? 6:00
Anyone who understands velocity banking “knows” not to work the process with a higher % rate than the rate you already have.
You would hope so, but the Velocity Banking channels often pitch using higher interest rate loans to pay off lower interest rate loans.... and these videos get massive numbers of views, so they are teaching something that doesn't work.
Christy Vann COUNTS on IDIOTS NOT being able to understand ANYTHING!!!
@@TheWilliamLeeShow. STUPID people will fall for ANYTHING!! Christy Vann is a TOTAL SCAMMER!!!!
@@TheWilliamLeeShowmaybe? They also pitch simple interest LOC vs compound interest loans
Sound advice Mr. Lee thanks for the spreadsheet!! this will help a lot of people!
Ok, I just stumbled across velocity banking, and I thought I was completely missing something, because it seemed like they were all just skipping over details. This made me think that I am getting too old to do these kinds of things anymore, and I'm glad I do still have my senses.
They do skip details.
There is one lady who showed an "Infinity/Velocity Banking" thing on a cluttered whiteboard where the HELOC balance got to zero at month 6, whereupon she declared it was done successfully. Dozens of people commented that she neglected to take out the expenses for that month. So she was showing 6 months of income but 5 months of expenses. Her reply was: {nothing}. She just completely ignored them.
She also showed where 6 payments of $1,100 paid off a $10,000 balance. Yeah, she ignored the comments about that, too.
@@Fred2-123 I think I know which lady you mean, and she is actually the one who got me started down this rabbit hole. I'm glad I didn't go any deeper to need a shovel to get me out. I already restructured my debt once over 5 years ago, and I'm just now getting back into the excellent credit score range.
I too found gaps in her logic and it humorously reminded me of this Sacha Baron Cohen clip: ruclips.net/video/hiGEh7UoMYg/видео.htmlsi=Fwz88NudI1B_l4l4
I know the lady you refer to. She never answers anything critical even if the point made is concrete
My mom's been harping me about velocity banking and this was my thinking as well, but I'm glad to see you did the work to prove it.
I will use your video for my clients as a third party info. I tell them the same thing. I am a CFP. But you did it so well explaining.
Awesome! Thank you!
Interested in the initial car loan wasn't added
Thank for providing valued information. I was going to do the velocity way.
Your video came at the right time, thank you!
You're so welcome!
Great video. This is so helpful, going to use this method to pay off my tesla model 3
Glad it helped! Thanks very much for your comment!
I do believe velocity banking is not the proper way to pay off a loan but the way you calculated the interest on the ploc is probably wrong because the interest is calculated daily on all ploc's I've ever seen, not monthly like a credit card.
No, at the end of the month they calculate the interest as the average daily balance times APR/365.
We really are talking semantics here…and going hard in the “nerdery”… that said, you are missing the payment that would no longer be there in the velocity banking case. If their expenses in the example include that car payment, and they pay it off, they have more to place towards the LOC…its also not included in your second example as it is assumed that the extra cash flow would be in addition to the payment they have. If we are going to break it down to the pennies, it would be interesting to see it calculated accurately. Thanks for the perspective though. BTW…who in the world has a 2.5% car loan any more!?😂😂 I’m staring at 8% hard in the face. 😢
Pay cash, no reason to pay 8% car note on something inexpensive and affordable. High standards much?
I was thinking use all the extra cash for principal and use the LOC for emergency instead. Good video
Works for me. But I also have a small emergency fund, too.
That HELOC interest rate can eat you alive if you're not careful. Had a friend transfer his first mortgage to one for this payment flexibility and he is paying 9.5% interest on what used to be a 30 year fixed note at under 4%. Not too smart.
@@imnitguy Yes, using a HELOC to pay off a lower interest loan is just dumb. My house is paid for, and I have a Personal Line of Credit with zero balance. Always dumped extra cash into the principle on the car loan.
Great lesson!
Glad you liked it!
Great content, thank you
This is exactly what I thought when I saw the video about velocity banking.
I listened to my mom, I wanted to buy a used car but she was not convinced that it was "safe" and should buy a new car. Still I had the cash to buy the car, instead I listened to her and leased the car and bought it out which was the most painful thing ever. That cost me 5 years with interest.
Cash cars are the best value. I bought two Chevy Impalas from govdeals and sold one to my friend who had recently had his car totaled. He paid around $3800 for the car with 80k miles almost four years ago. I spoke to him yesterday and he thanked me for selling him the car and said, I can't believe I haven't had a car payment in this long and the car is still going strong. If you care more about getting where you are going and less about the fancy ride you travel in, you will move lightyears ahead of those with differing priorities. I own two Honda Fits. Why? Because they last forever, they are cheap and they get the job done. My 2018 EX has all kinds of creature comforts like lane keep assist and other things. Most would scoff at such a minimalist ride but it was $15k out the door with 44k miles and should get 300k before it dies. Make smart choices people. Cars are utilitarian. Stop worrying what everyone else thinks, it is none of your business!
Excellent video
Thank you WIlliam!
I love your new channel, William! Thank you for all you do!
Glad you enjoy it!
Great advice 🎉
Good Job William!
Thanks!
You are correct my friend 👌
Or just make principal only payments which also knocks off the amount of interest you pay on the car loan
Great content ❤
Thanks!
Sure, until you see the problem with his math. I guess the difference between the interest and the car payment just becomes his cpa fee, instead of going toward the principle and being subbed from expenses... 🤷
Great advice, Will! Thank you!
My pleasure!
Thank you for the feedback sir 🙏
You just spent an entire 10 minutes to tell us "you can pay off your car faster if you put every single dime you have into it every month". Thanks Sherlock
Transferring debt from 2.5% interest to 10.99% interest! What a great way to continue the cycle of being in debt and broke!
Bingo. That train derailed before it even left the station.
You forgot to add the extra 286 a month they would have for cash flow because the car note would be gone.
No, that's included.
Yes he forgot, No it is not, then cash flow would be $1905......
@@TheWilliamLeeShowwhere did you include the 286?
You left the same expenses and cashflow amount
I realized it as well he didn't adjust his new cash flow & expenses which shows his scenario would save more money through velocity banking & paying off the car loan quicker.
Yes he forgot to add car payment. And bloc interest is calculated daily not simple average.
THANKS!
Thank You
Does anyone know where to et a 2.5% car loan today? Asking for a friend, lol.
Yeah, the person that this video was based on obviously got the loan a while ago, before rates shot up.
2019
maybe from your parents?
Velocity banking only really works with mortgages. Because you save a lot of money on interest by moving ahead on the amortization table.
The majority of home expenses such as water electricity gas cell do not allow LOC or credit cards to pay these items so the only expenses such as groceries personal expenses and gas would be paid with loc
The thing is, lines of credit interest isn’t fixed it’s based on the balance. So the paycheck in the account for most of the month then withdrawn at the time to pay bills lowers the daily average balance which decreases the interest rate for that month. Even with a fixed loc. the fix prevents it from going up, but it can always be less depending on how low the balance is. It’s an option for people who can’t throw all their extra disposable income to the car
sorry but it doesn't decrease the interest rate for that month, it only decreases the interest amount based on the new balance, the interest rate stays the same unless bank changes your rate up or down for some reason.
@@carlsapartments8931 I think you are right. My bank changes the LOC interest rate as the Prime Rate changes on the unpaid balance. But, I also think that the object is to get the lowest payment of interest to obtain the savings.
The interest rate is fixed. You can't even get the terms correct.
They are right, even in your last drop down chart, you are still saying the expenses are at $1286. At this point the car is paid off. The expenses would drop down to $1000 and daily would be $33.34 not $42.87. Still doesn't change the results very much, you are still paying an extra $307 with the Velocity way as opposed to just paying directly to the loan. If you locked in at a low rate like this, there is almost no point in paying it off early. You can make much more than 2.5% even if you put that extra money into an online savings account. Im earning 4.5% right now. Velocity will only work for the benefit if you have high interest loans or debt.
The expenses including the car loan are $1,572 per month. Expenses excluding the car loan are $1,286. So when the loan is paid off, the correct remaining expenses are $1,286. Re. just investing the extra money instead of paying off the car loan, I agree. A person with a 2.5% loan could use their extra income today and invest over 4%. But remember, then you have to pay taxes on that interest at ordinary income tax rates, so after tax interest income is probably in the low 3% range. At theat point, the extra income is so small that a person might be happier just paying off the loan.
Cash cars are the best value. I bought two Chevy Impalas from govdeals and sold one to my friend who had recently had his car totaled. He paid around $3800 for the car with 80k miles almost four years ago. I spoke to him yesterday and he thanked me for selling him the car and said, I can't believe I haven't had a car payment in this long and the car is still going strong. If you care more about getting where you are going and less about the fancy ride you travel in, you will move lightyears ahead of those with differing priorities. I own two Honda Fits. Why? Because they last forever, they are cheap and they get the job done. My 2018 EX has all kinds of creature comforts like lane keep assist and other things. Most would scoff at such a minimalist ride but it was $15k out the door with 44k miles and should get 300k before it dies. Make smart choices people. Cars are utilitarian. Stop worrying what everyone else thinks, it is none of your business!
Its not wrong but if you did your way you basically have absolutely no cash for anything at all. Good point at the end 2 shae!
Worst scenario ever passed by me. My BIL wanted to refinance his mortgage 3.75% 30-year-fixed rate mortgage for cash out to pay off a loan used for renovations that was ending it's 0% interest period. So, he wanted to refinance his current balance and add $30k to the principal and pay 6.25% on all of it on a new mortgage. I suggested a Home Equity Loan (HELOAN, not a HELOC), 15-year-fixed rate at 8.99% and keep his 3.75% first mortgage.
Isnt the payment larger than 1600 with velocity banking? Because the car payment amount is part of the monthly expenses, so when you transfer the entire loan to the ploc, you also remove the monthly car payment from your expenses? Unless the interest alone is near equal to the old car payment?
For me I don’t want to get an additional ploc or heloc. I split the extra money I made btw the car loan and savings. Once the savings got 1K above what was left on the car loan I paid off the car loan. Saved about a year in payments. This worked well when interests rates were low. Velocity banking works well when interest rates are high.
Velocity banking only works if the LOC has lower interest rate than the car loan or mortgage. Unfortunately, this is almost never the case.
Pay your daily interest every single day. Then on the day your payment is due all of your payment goes toward the principal. I paid off my car loan in 2.5 yrs time
Finally, no nonsense approach to a video about finances.
Im not sure on a car loan but dumping chunks into mortgage principal at the start will definitely help a lot. Even a 25% monthly interest rate CC is a hell of a lot lower interest than a 6% 30 year mortgage interest
Ouch, you are so wrong! Please don't do this!!
It's sad what these VB charlatans have taught people. Martin, if you can't do the math yourself, find a trusted friend who can.
Of course.
The most important thing you said was to get a PLOC and pnly use it for emergencies. I have one and im dabbling around with it. It has made life easier financially and mentally.
How to pay off your car loan faster? Pay more than the minimum required payment.
Velocity Banking is fool's gold, no matter what that lady pushing VB all over RUclips says.
Hey, do you have a link to that spreadsheet?
The scary thing is the VB lady that talks about paying off a fixed rate mortgage with a variable rate HELOC.
Well, she also pays off a $10,000 balance with 6 payments of $1,100. The true scary thing is that the comments on her videos are full of people who believe her.
I think using a line of credit to pay off a car loan, putting all your paychecks in it, using it for bills and misc spending, is playing a little fast and loose with credit. It's way too easy to get yourself used to always spending on credit. I would suspect that a lot of people who do that end up never paying off the LOC, and end up in a way worse situation than had they just made extra payments to the original car loan.
A+! Thank you for comparing paying EXTRA on the original low rate loan. The VB videos NEVER do this as they would always loose paying 3x MORE interest!!
A 2.5% interest loan is less than inflation. The fact is the 2.5% loan is free because the value of money is declining faster than the cost of the loan.
I thought velocity banking was to take a high interest loan and utilize a lower interest LOC to pay it off. This scenario is clearly backwards. There is something to be said about the financial gymnastics one has to do to save a few bucks in interest. Velocity banking might only make sense in very specific cases.
You're correct! If he had done the scenario the way vb is intended (with the ploc at a lower interest rate, he wouldnt be able to prove vb methods wrong.
@@ceedee8953 Yes, but almost always the PLOC or HELOC has a higher interest rate.
@@ceedee8953 He didn't make it up. The scenario came from one of the VB charlatans.
You added wrong
286 x 46 is $13,156 not $12,989. Other than that awesome video
Is it simple interest or compound interest?
I feel like you should have used a mortgage payment as an example cause I feel like it works better there but I’m not sure
Was the interest type adressed? In velocity banking, simple interest LOCs are advised. Aren’t auto loans calculated as compounded interest?
No, they are not. That's another misleading bit from the VB promoters. APR divided by 12, times the outstanding balance, every single month.
I think you forgot to remove the car payment if you transfer it and use PLOC or Velocity Banking, that 286 car payment no longer exists, there for whatever the account you using will dictate the payment and interest... so really it could be whatever their cash flow is $1619 + the car payment they were paying out 286, let round off to 1900 a month that can be dedicated and technically, whatever account that balance is on will not have a payment since they would already be paying 1900.... They'd actually end up saving on interest and could pay the car off in 6-7 months. Thats a fact!
Agree a big miss
Yep, you’re right.
Fist example is still the best one. Just pay the car loan down early with extra cash. It doesn't take a Rhodes Scholar to know you don't replace a low interest loan with a high interest one.
Only an idiot transfers a 2.5% loan to 11% then pays it off. lol doesn’t even almost make sense.
@@JOHN77135 It's not a miss. $286 isn't included in the base cashflow. $1619 is what's available before ANY loan payment at all. Therefore, it's included in all scenarios. $1619 it's what's left from you job to pay the car.
I made an extra payment on my loan and the just called it a prepayment and did not lower the balance interest was calculated on.
I thought I would dislike this video, but then the math was good. So I was good. This is a very simple example. The best examples for velocity banking include multiple credit cards and credit balances involved for which previous credit is extended and are not ordinarily this simple.
Well yes and NO......What about emergencies? what about the money from the 4th example it is the same as example 3, did you forget to add any extra money from payments that were using the POLC? So many other factors that Velocity banking, your way, or anyone else's is NOT the right for everyone.. SO I recommend using all this methods and come up with what makes sense for your particular scenario!! I have used credit cards for the last 20 years, and I have yet to pay Interest on any of them!!!
I totally agree.... every scenario is different, so a person needs to run the math on their unique situation to see if something will or won't work. Credit cards can be great IF you use them in a way that gets you the benefits (the points) without incurring any cost (the crazy high interest cost).
Get out of debt will be easier in a maga economy
Just wrote a check for $28,000 and paid off the car. Easy clap. Lol, screw $590/mo in payments.
If you need extra money one month, just pay the scheduled car payment that month…. Hello….
What’s the deference between a ploc and a credit card
I'm 42 with $300k in my 401k and a stock and crypto portfolio worth a combined $850k. I started investing just 2 years ago after working for 15years and having just short of 70k in savings. I'm still with the same company but my decision to invest has made the difference for me and my family. Investing is your best friend. The sooner you start, the better off you are.
You could retire now If you moved to a
cheaper country. Good job.
It’s scary how this is the life of an average American. Years of working and very little or nothing to show for it.
Living from paycheck to paycheck is no way to live, Was stuck in the rat race for a long time, been there, and investing will always be better.
The importance of investing can never be overestimated.
I got laid off my job and started investing in February, invested 34k in the market and my portfolio is currently worth slightly over 97k. That's more than I make in a year from my job. I’m glad I didn’t shy away from investing
First off used car loans you aren’t paying 2.50% interest 9 out of 10 times. Not even for new cars hardly because very few people have excellent credit. 2nd off most people aren’t disciplined enough for a zero budget where you have zero left over at the end of each month. And 3rd beings people aren’t disciplined the velocity method is basically dummy proof of you put all your money in it and keep doing that and pay off your vehicle even if you have added debt to it by the end you can then use the money you was using to pay off car to pay it off and get out of debt. Getting out of debt all together is a great thing regardless what method you use. So my suggestions is do whatever works for you an get out of debt and use your money to make more money wether it’s through real estate or some other venture.
I'm just wondering how you only have a expenses of $1286 and a cash flow of $1619. If that was my case I would at a minimum double my car payment. I looked at all your scenarios and I'm assuming they add up. I think anything that will pump up people to get out of debt sooner is a good thing so if Velocity banking works for some people atleast it gets them off of the mat and on the road to be being debt free even if it doesn't work out perfect. I would say taking all of your cash flow and putting it on the car loan which would work also leaves you with the feeling of being broke all the time. My method for staying out of trouble is to pay 1/4 of all your bills every week. I don't mean your cable bill one week and next week pay your car loan etc.. I mean take your $160 electric bill for instance and set up automatic $40 a week payments, better yet make it $45 or $50. Do that with every bill you have and in time you will have a negative balance due each month on every bill. Some months also have 5 pay periods. before you know it all your bills are paid one or 2 months in advance. Then when unexpected expenses come up you could postpone a payment or 2 and you're still good. It removes a lot of anxiety. Try your best to be in the drivers seat
Never heard of this method but it makes sense. Thanks for sharing.
The only thing I break up is my house payment. I get paid 3x a month so I pay my house payment in 3rds. Most of the time my house payment is paid 10 days before the 1st of the month.
Thats what I do but I split it up into quarters and pay once a week but I do that every week so I pay 13 monthly payments a year. It's a great feeling to be ahead on bills. It's easy to do if you just pay a little extra on each bill per week @@terencescott3957
So, my understanding is the PLOC way basically costs you an extra $50 a month to pay it off in 8 months, while still having access to cash for whatever. I understand this is for illustration and the initial numbers are way lower than reality. So, to use PLOC with a higher number I guess it would cost more per month additional for the goal of paying it off in 8 months or way sooner than contracted. It may be worth it to pay the premium to still have access to cash if needed. I'm just spitballin here.
I guess I’m the only one that grew up poor. You have to weigh your needs vs. your wants. How can anyone buy a 12k car when they only make $2900 a month? And now they want to get another loan?? Sheesh!
Thanks for the video, but as others have pointed out many of the figures are wrong. I accept that this may not change final conclusions. What I noticed was that I have never seen a velocity banking video where a cheaper loan is replaced by a dearer LOC. I can't say they don't exist, just that the ones I have watched all consolidate a number of debts and give the person a plan and a structure and ultimately a result they were not currently achieving. I don't know enough to say it's the best way, only that I have not seen VB used to trade one single debt for another, only to consolidate multiple debts in to one.
Funny, all the VB videos I have seen have ALL showed paying a low rate car loan or mortgage using a higher rate HELOC or PLOC.
@@Fred2-123 That would only work where prohibitive conditions applied to the original debt, prohibiting it from being payed out as quickly as an apparently dearer LOC.
I ALWAYS have cars..for multiple cars my auto insurance is less for 2 than one 2021 truck insurance. I have an old nonrunning car in "storage " saves me $720 yr in vehicle insurance..will pay my mortgaged 2021off because with a loan I am required to have full coverage..with my 2021 paid off I can choose to put it in "storage"..if I have a financisl crisis..I do not put $ into my old 1994 second car..just take it out of "storage: and use Uber until I get a new job, pay off medical debt or whatever the financial crisis
I only lease vehicles and I assumed I couldn't do something like this because I was leasing however, if I was able to do this it would benefit me in numerous ways. So, is it possible when leasing to payoff the lease in eight months and drive the vehicle with no payments due for the remaining twenty-eight months?
No, leasing is different. It's not a loan, it's more like a long-term rental. So while I'm sure they'd be happy for you to pay all of it upfront, that would not benefit you.... it would hurt you (because you'd be paying them early for no benefit).
I feel like "velocity banking" would work if you have multiple debts at varying interest rates to lump sum payoffs and increase cash flow by paying of one debt at a time
Correct. And if you value cash flow. And access to cash for emergencies and not have your cash tied up into the car loan.
How you feel does not affect the math.
I heard you talk about what not to do. It is probably better to focus on what to do. I am sure it is in there but I do not have time to listen to what I should not do.
If I had an 2.5 interest loan I wouldn’t even bother paying it off fast, that’s just a good write off and better rate than inflation. If it’s above 5% then you should use the strategy to pay off faster
If I open a PLOC at my bank, can they help me get it started?
This is a 2.5% loan, keep it, and deposit the extra cash into a high interest savings account
Keep it simple hand them cash then they hand you the title done deal💯👍💯
All interest is not equal. Velocity Banking deals with people who are debt with various kinds o interest. If you have cash flow already then you don't need a PLOC or a HELOC. Velocity banking is for people with high debt with bad cash flow. I am not doing velocut banking myself but I have seen it work for people. Also I don't see car loans with a 3 % interest rate. Most of the people I see on the financial audit channels have high interest car loans.
2.5% interest on a car today is crazy
I thing velocity banking is to get out of a hole and create a buffer zone. Never to live off velocity banking. Once your out, stick to a regular budget .
good
Could you show your work please? I show the car payment transfer into the PLOC satisfies the original car loan and the $286/month payment is deducted from expenses each month. Then I show $107.50 interest payment is added to monthly expenses. This would result in a month 1 $178.50 increase to the cash flow number all things staying the same.
I showed my math - it's the spreadsheet in the video. Re. the increase in cash flow that you mentioned, you only increased the cash flow (the way you explained it) by only making interest payments on the new PLOC loan and by NOT making any additional payment to pay off the principal. But you have to pay down the PLOC. So that increase in cash flow is only an illusion.... or it's temporary, however you want to think of it.
Wait! In the 5K example did you say 5k will help me pay the loan off early by only one year?
But why do I want to pay off my 4% car loan if my high yield savings account is paying me 5.35%?
Just buy the car with credit card. Transfer the balance on CC, get no interest for 12 to 18 months deal/card. Transfer fee is 4-5%.
Beats all the other methods.
buy a car with a credit card??
Why do these people keep saying to use a credit card to buy a car? NO dealer will accept a credit card to buy a car. None.
And why do the VB & IB gurus say to pay all your bills with a card. Most people's largest bills are mortgage/rent and car loan. None of these will take a credit card for payment.
So how about this, I am using your numbers. take $1000 extra each month and add to the car loan and place the 600 in savings. Just some quick math in my head, You paid the car off in 11 or 12, ( We will stick with 12 months ) and now you have about 7200 in savings. WOW. Month 13, THE FLOP, take the $1000 plus $286 add to the savings account since that is now extra cash flow.( $ 1286 ) add the 600 to your checking and go buy something nice for doing a good job for 12 months. Keep that up and have money for a rainy day. If you run that out for 24 months, you would have somewhere near $22000 in savings and hope you did not blow all the $600 each month, maybe $3000 in checking. Only took an extra 4 months.
Yup, lots of ways to move the dollars around. This person has good cash flow and can pay down the loans, build some rainy day savings, and invest for retirement.
Honestly, @2.5% I’d just take the full term to pay it off. That is pretty low cost of borrowing compared to even new car financing, never mind all the depreciation saved by going used.
You had me up until you stated if you put all your cash flow into paying off your car note and you have no money for things that may come up; to get a Loc or Ploc. Well in that scenerio you are basically accruing another debt if you use that Loc for extra things you may need and at 10% interests on a daily average thats not very smart? Or am i missing something. Seems to me Velocity banking is just a form of banking from your LOC instead of your checking account. That way it keeps the interest reasonable and you have cash flow if you need.
Yes, Velocity Banking is just using your LOC or PLOC or HELOC as a checking account. It's often not the magic that the Velocty Banking enthusiasts claim it is. And it comes with real risks - if guaranteed by your other assets - of having those assets foreclosed on if for some reason you can't make the payments. Imagine using a HELOC (a loan on your home) to pay down your car or your credit card. What if something happens and you can't make the payment? Now they can foreclose on your home.
You are supposed to have an emergency fund
Well technically that would affect your mortgage payment as well. If you can't"afford" to pay heloc/ploc then u wont be able to pay any of your bills. @TheWilliamLeeShow
Plus the heloc payment is your paycheck. If you lose your job then the heloc and original mortgage and electric trash gas and water bill will ALLL be an issue. What if I got out of that debt in 6 months instead of riding it out 5 years. For a few extra $ I'll do it 🤷🏽♀️