Velocity banking is a concept that has gained immense popularity worldwide in the last couple of years. With this strategy, you get to pay off your mortgage or debt within the shortest time possible. For instance, you can use it to clear your 30-year mortgage in about 5-7 years, saving you the hassle.
At first glance, the velocity banking strategy might seem like a simple and straightforward method to paying off a mortgage early. But come to think of it, using debt to pay off debt comes with some significant risks. Below are notable disadvantages to using velocity banking.
More Liability Equals More Risk
As long as your current situation doesn’t change, it is easy to see how the velocity banking strategy could successfully pay off your mortgage faster. But often likes to throw curveballs, especially at the most inconvenient times. If you suddenly find yourself out of work, or maybe your expenses unexpectedly increase, you might find yourself in a cash crunch that will leave you in some financial trouble.
It Could To An Increase in Financial Stress
If at all you happen to be risk averse, increasing your liabilities may just add unwanted stress. Ensure you determine if the disciplined effort it will take to manage your cash flow with this strategy will be feasible.
For those thinking about the different moving parts they must address on a weekly or monthly basis causes your blood pressure to rise, then there is no essence of using velocity banking. Be sure to save your health and maintain an acceptable level of peace by using another remarkable way to attain your financial objectives.
Margin of Error is Reduced
Going with the nature of the velocity banking strategy, you’ll have little room for deviations from your payoff plan if you want to be successful. What this simply means is that you need to maintain your current income at all costs, keep your expenses at or below your current levels, and be precise with your cash flow calculations. The intention is to reduce interest costs and eliminate debt faster.