Velocity banking goes by many names and is much debated concept by both financial advisors and their clients. So, what is velocity banking? Is it a good idea for your clients? Fortunately, the truth concept calculators are primed to tell this story and give you the whole truth about velocity banking as any velocity banking calculator should.
Most people typically employ a velocity bank strategy to pay down mortgage faster. Unfortunately, using the strategy in this way helps people to assuage their fear to paying too much interest without examining whether interest is the issue. Here is more you need to know about velocity banking.
Why The Velocity Banking Strategy Is Flawed
The main issue with velocity banking approach is that it uses debt to pay down debt. This may stem from a misunderstanding of the infinite banking concept which is best used with whole life insurance.
While the cash value of whole life insurance is useful, it cannot do more than what it can do.Think of it this way, a policy loan is still a loan which means that you are paying interest. If you use an interest-accruing loan to pay for your expenses, you’re adding a cost to your expenses.
Using Cash Value For Opportunities And Emergencies
Most people feel that it is important to stress the purpose of whole life insurance is to store cash. This cash becomes more powerful when used for emergencies and opportunities because of compounding interest.
It doesn’t mean that using the cash value at every turn is going to be the best use of that account. For instance, not very emergency or opportunity is equal. In every scenario, its important to look at the match to determine the best possible course of action for yourself or your client.
Bottom Line
Velocity bank has become one of the most financial approaches that most people leverage on. If you want to pay your debts and mortgages faster and on lower rates, velocity banking should be your first option. With it, you will handle a lot of financial strategies without the hassle.
