Velocity banking is a strategy that makes use of a home equity line of credit (HELOC) to pay off debts rather than traditionally paying it down using the money that you earn each month. Advocates of this strategy claim that it has the potential to reduce or help you pay off your debts much faster. Better, it can greatly minimize the interest that you have to pay on said debts.
While there is some truth in this, it also has its own drawbacks. No wonder you should never rush through your decision of leveraging the velocity bank strategy without having a clear idea of what is destined to come your way. In this article, we will take you through some of the cons that emanate from using this strategy.
Adjustable Rates for Your HELOC
One thing that make some people to be against the velocity bank strategy when looking forward to paying off their debts is that you may have to deal with adjustable rates for your HELOC or personal line of credit. And this is easy to see why considering many banks no longer offer a fixed rate HELOC. For this reason, you might be forced to change your prioritize and commitment.
Lack of Security
Lack of security is undeniably one of the biggest challenges that is destined to come your way after making up your mind to leverage the velocity bank strategy. This does not come as a surprise since it may fall through whenever the interest rate on your HELOC changes. Things are not any different if the housing marketing drops and lowers your credit access. No wonder some people are better off looking for a different financial strategy they can leverage.
The Bottom Line
Just because the velocity bank strategy has some downsides, it is not to say you should steer clear from using it. Actually, good things are destined to come your way the very moment you decide to make the switch. So, what are you waiting for before you can finally give it a try and change your life for the better.