so you're doing your research about
velocity banking trying to figure out if
velocity banking is real can it really
actually help me pay off my mortgage and
my debt and you're doing your research
which is really good and by now you may
have already watched videos about
velocity banking how it works and you
may have seen some case studies already
but equally you may also come across
videos that claim that they debunked
velocity banking velocity banking is
just a marketing gimmick or that
velocity banking is just a hype and a
madeup thing on the internet and you may
have checked out some of the videos even
on our Channel about this very topic
which of course we call it accelerated
banking instead of velocity Banking and
I too have seen many of these videos by
different Finance channels and content
creators out there saying that they have
completely debunked velocity Banking and
that's a complete hype and when I check
out these videos they all seem to kind
of get this one thing wrong about
velocity Banking and how the math
actually works so let me kind of give
you a summary of what many of these
content creators out there are saying
that they debunked velocity banking what
they're saying and why actually their
calculation might be off so with that
said my name is San quac one half of the
quac withers I'm a Serial entrepreneur
real estate investor and a certified
credit counselor and I've been teaching
this concept the velocity banking
concept for almost 8 years now and
having done this for almost 8 years I
pretty much kind of heard it all as far
as people debunking velocity banking or
they might ask me questions like well
Sam wise this better than extra payments
why would you ever want to use this
sounds like a smoke in a mirror so
having done this for almost 8 years I've
seen nearly all scenarios and different
comments concerns about velocity Banking
and I do want to address this one when
people say they debunked or they killed
velocity banking so here it is now I
believe the only way to verify and
validate any Financial strategy is the
math unless you're using some kind of a
common core math right but using math I
want to show you why velocity banking
concept works and why many of these
YouTube content creators out there that
supposedly have debunked velocity
banking why they calculation of velocity
banking might be inaccurate and
incorrect so what I pulled up here is a
sample or a pretty close to a
representation of what a lot of the
YouTube content creators supposedly are
doing in terms of the math behind
velocity Banking and I'm able to tell
you that this is the wrong way of doing
it okay so this is how they explain it
now they're going to use some kind of an
example like a $2,000 line of credit
which you know by now with velocity
banking you're going to use a line of
credit you're going to apply that as a
principal chunking payment against your
mortgage which helps accelerate the
principal mortgage pay down so we're
going to assume that we're working with
a $220,000 line of credit with an income
of $8,000 and expenses of 7,000 which
gives us a net cash flow of $1,000 every
month now that would mean that if we do
the math okay if we follow the activity
we subtract 20,000 by 8,000 which gives
us a $112,000 balance and then we used
the line of credit to take care of the
expenses gas groceries diapers you name
it and that ultimately leaves us with
the end of month balance of $199,000 now
here's where things go wrong a lot of
the YouTube content creators and
so-called Financial experts are taking
the end of the month line of credit
balance and factoring the interest cost
on the end of the line of credit balance
itself this is incorrect because with
the velocity banking strategy it relies
on The Daily interest calculation
factored in as well which I'll show you
in just one sec as to what I mean so if
we take a 9% assumption okay let's just
say this line of credit will cost us 9%
every year so what I did here is that
I've taken this balance of
$199,000 times 9% interest divided by 12
because all interest rates on lines of
credit are annualized so we have to
divide it by 12 to get us to our monthly
interest cost for this line the credit
which means that we have an interest
cost incurred of
$42.50 and what these YouTubers say is
that the next month the line of credit
balance starts at $1
19,42 now with the error here is that a
lot of these YouTube Financial gurus
they're assuming and treating this as if
just like any other advertized debt
which is not how the velocity banking
concept works I'm going to show you what
the right way of calculating the math
behind velocity banking looks like okay
so this is a calculator that we built
for our clients and students and those
that follow and use velocity banking for
their mortgages now I'm going to show
you that the assumptions are the same so
we're working with an $88,000 net
monthly income $7,000 of our living
expenses which is exactly the same as
our previous same variable same
assumption that we're making with the
wrong way of calculating the velocity
banking math so coming back to this
again $20,000 line of credit 9% interest
okay same thing here $20,000 line of CR
credit 9% interest again just to show
you that I'm doing this Apples to Apples
when it comes to the variables and the
factors now obviously here in the living
expenses it says not including your
monthly principle and interest we're
just looking at the line of credits what
I did is I zeroed out the mortgage
information so that we're isolating the
calculation just to the line of credit
so again $88,000 net monthly income
$7,000 uh living expenses which gives us
a $1,000 cash flow $20,000 is the line
of credit that we're going to use with a
9% interest rate on the line of credit
itself now what this calculator does it
actually factors in the daily cost of
the interest on the line of credit as
time goes by so let's assume that we
start using the velocity banking
strategy on February 1st of 2024 we're
going to go and apply the $220,000 chunk
against our mortgage helping us save
money by accelerating the payments as
well as accelerating the amortization
now what we have is a $20,000 balance
and just like the velocity banking
strategy dictates we're going to apply
uh our income towards our line of credit
balance now you might be seeing well Sam
I thought the income was $8,000 why are
we seeing $4,000 here and another $4,000
here well what I've done is I'm
simulating an average American who gets
paid on the 1st and the 15th you might
get paid every other Friday or you might
your pay schedule might look a little
bit different but for most Americans out
there working at a job a lot of them
will get paid on the first and the 15th
or at least every every other week so I
simulated taking the $8,000 monthly
income braking it into two on the first
and the 15th that's why you're seeing
that breakdown right there okay so what
you'll notice is that by taking that
$4,000 let me zoom in for you guys there
we go I know it's a little hard to see
I'm taking the $4,000 income and making
a deposit against the line of credit
what that does it immediately decreases
the average daily interest remember with
a line of credit we are getting charged
interest on a daily level so if the
balance changes tomorrow guess what the
interest cost goes up for tomorrow so
we're going to keep the balance as low
as possible this is why we're taking all
of our paycheck towards the line of
credit balance so now what we are seeing
is that because we lowered the balance
to $166,000 our interest cost for that
day is
$3.95 now this continues until we make
another $4,000
income deposit into the line of credit
lowering our balance to
$122,000 which means we're seeing a
further reduction on our average daily
interest cost do you see that so now
we're paying
$296 each day because our line of credit
balance is lowered by the income now you
might be saying well Sam what about the
expenses what about the $7,000 living
spense now I factored the living cost or
living expenses on the 28th pretty much
really close to the end of the month the
reason why we want this is that the more
separation there is between the income
and the expenses in other words if we
can keep the line of credit at a lower
balance for a longer period of time that
means the line of credit is incurring
less interest cost over time now you
might be saying well hold on Sam time
out there's no way for an average person
to have all of their $7,000 living
expenses to come out at once well we can
get pretty close uh what a lot of the
practitioner of velocity banking does is
they use a credit card to do all their
expenses gas food restaurants groceries
you name it and what they do is they
consolidate all the expenses into one
because credit cards don't charge your
interest right off the bat not at least
until the next billing cycle right so
it's a great way to further delay any
interest cost being incurred on the line
of credit because we don't want to
increase the line of credit balance
great now you might also ask well hold
on Sam not all bills can be paid by
credit cards what do you do then well
let's simulate that let's say $2,000 of
our expenses can only be paid using a
checking account right be auto loan or
other credit card bill whatever the case
might be so to simulate that I'm I'm
going to go ahead and separate living
expenses into two and we'll go 5,000 on
the 28th and 2,000 on the 22nd so even
so what we're seeing is that our
interest cost is relatively really low
now here's where it gets really
interesting let's go ahead and do a sum
of all the interest that we paid for the
month of February so what I'm going to
do is I'm going to highlight the column
where it says average daily interest I'm
going to go all the way down to the last
day of February and what we're seeing is
a sum I know it's hard to see so I'm
going to go ahead and put it in here I'm
going to do a sum
of these cells right here I'm going to
make sure I capture all of this there we
go up to the very last day of February
so what that gives me is
$101 of interest for the entire month of
February so because we took our income
made a deposit against the the principal
balance of the line of credit treated it
almost like a checking account we
actually lower the average de balance on
the line of credit subsequently we are
only paying
$11.34 of interest on this line of
credit using velocity banking compared
to what many of our amazing YouTube
gurus out there saying that we're going
to pay
$142.6 so now you can actually see the
two differences right a lot of the
YouTube gurus who use this calculation
will simply just take the end of the
line of credit balance for the month and
multiply it by the interest which is not
accurate at all it doesn't give you the
full picture as to how the actual
velocity banking calculation Works using
this so again
$11.34 that we would pay using velocity
baking math on the line of credit what
our gurus are saying is $142 which is
incorrect right so there's a a
difference of nearly $41 of Interest
cost and yeah I get it it's only $41 for
this month but you continue to compound
over time that could turn into hundreds
thousands if not tens of thousands of
dollars of Interest saving over time so
I'm going to go and put 101 let's see
what was the number here
$114 34 cents so
$11.34 cents I'm going to compare the
two there we go okay $101 of velocity
Banking and $142 of Simply making extra
payment of $1,000 every month you can
see there's a clear difference in terms
of savings so this is why velocity
banking is not the same thing as just
simply making extra payments to your
mortgage or making bi-weekly payments
towards your mortgage it's not the same
thing velocity banking works because
we're able to leverage a tool a line of
credit that allows us to reduce the
interest cost at a daily level and
leverage that math towards more interest
saving but most importantly Time Savings
now some of you might be sensing a
little bit of frustration for my part
and that's because I know a lot of these
YouTube gurus and financial experts
they're incredibly smart okay they're
they're very credible they have
qualifications they have training
they've been educated in the world of
finance and it frustrates me because
they don't go deeper into actually
figuring out how velocity banking Works
they're just looking at the surface math
and thinking oh this is just a g this is
just a smoke in a mirror and I sincerely
wish that a lot of these YouTube content
creators will actually look at velocity
banking with the lens of humility with
the lens of actually looking at the math
instead of just doing this type of you
know surface level math which
unfortunately does disservice to the
entire Finance community and I hope that
they can see this video and figure out
oh my gosh like maybe I should do a
little bit more investigation and
research when it comes to the velocity
of banking math now I get it it took me
two months to figure this out as well
okay I looked at this I'm like okay this
is just makes no sense at all why not
just make extra payments why not make
bi-weekly payments why even use a helon
I was very skeptical with the strategy
as well I thought it was some smoking
mirror and the people are trying to sell
loans I thought that as well but when I
actually took the approach and went into
the spreadsheet and really dug deep into
how does this actually work from the
sense why are we even using alant of
credit what's so special about it I dug
deep and research and I came out
figuring out oh my gosh I'm actually
saving a lot more money using a line of
credit velocity banking than just doing
extra payments or bi-weekly payments the
math doesn't lie and I asked all of you
and I asked our YouTube channel content
creators watching this as well please
take the extra couple minutes to look at
the math and not do this lazy junk math
that a lot of people are doing thinking
they debunked velocity banking which is
not true in fact it's so not true that
if you go to United Kingdom or England
or Australia they literally have an
entire mortgage product dedicated to
this concept called an offset mortgage
they're using it okay I'm I'm pretty
sure the entire country of Australia and
United Kingdom isn't getting duped and
scammed by this concept it just so
happens here in the United States we
don't have the same type of mortgage
products as UK New Zealand and Australia
we have to use what we got which happens
to be a line of credit and because of
the math that allows us to do this we
can use it to save money so if you're
watching this please share this with
your friends or share this even with the
YouTube content creator who claims that
they debunked velocity banking as some
myth or a uh um marketing gimmick right
share them with them I would love to
have a conversation if I'm wrong I'd be
more than happy to say I am but again
I've been doing this for almost 8 years
been studying this for eight years not
saying I'm better than anybody but
because I've spent a lot of time even my
own trying to debunk this I I came to
realize that math doesn't lie so having
said that if you want access to our
velocity banking calculator I'll leave
the link down below and check out some
of our other free training and content
uh we have it here in the YouTube
channel but the best way to see if this
is going to work for you is go get our
free calculator and see for yourself how
much money and time you're saving with
our strategy and we have additional free
uh webinars and content that you guys
can go check out so having said that
thank you love you appreciate you
subscribe if you enjoy this and we'll
see you in the next video take care