LEARN HOW TO CALCULATE YOUR INTEREST RATES AND WHY VELOCITY BANKING IS THE KEY TO FINANCIAL FREEDOM!

So when we're talking about interest rates, if you watched any of the videos, I'm always talking about an amortized schedule or amortization schedule is what it's known as. An amortization schedule has the same payment due every single month until you pay it off. When you're dealing with an amortization schedule, you are talking about the interest for the term of the loan has already been put in to those payments. If we're talking about a mortgage, then we're really taking big, big interest amounts, figuring it or calculating it into each of these payments. But like I've mentioned over and over before, the way that amortization schedule has it worked out is you are paying most of your interest within the first seven years. So the way that we win with Velocity Banking using lines of credit is to get out of that amortization schedule and into a line that is going to be revolving for us because our income is going in every single time we get paid and our expenses are coming right back out of that line as needed, meaning that we are going to actually be beating the interest because of the way we're using our income for us instead of it just sitting in a checking account doing absolutely nothing but sitting there. So with interest rates, we keep hearing that the feds are going to decrease rates, that they have done a decrease. It's almost laughable because I think it was 0.25% is all it's come down so far that I've seen. Not much, but anything's better than a high rate. So hopefully that will keep coming down. Now, when you're talking about interest rates on lines of credit, they're usually going by the prime, meaning that whatever the feds have set up, like an 8.5 prime rate, the banks will base their lines of credit off of that. So for example, this whole year has been based off of about an 8.5% average rate that the feds have. So most of what you have seen in the lines of credit this year have been about a half of a percent higher. So if it's 8.5, then it's been 9% that you would see on these lines of credit, meaning HELOCs, okay? So you've heard me say probably this year that the average rate for a second position HELOC is 9.125. That just seems to be an average that I'm dealing with. Some are 6.99, some are 12%, but the average I see is around 9%, which is about a half of a percent more than that 8.5 rate. Now that it's dropping, I don't know yet. I have to see how this ends up before I know what the average is. I'm hoping that it drops more than a 0.25 because that's not very much, but like I said, anything's better than a higher interest rate, okay? When we are talking about interest rates for simple interest products such as the revolving line, when I talk about the rates and how they are calculated by the bank, and I'll tell you that if you have a $10,000 balance on a revolving line of credit, and let's say that it's a HELOC and it's at 9%. We'll make it easy, so HELOC, 9%. All that means is it's based on the average daily balance when you're using a line of credit. Let's pretend this is the average daily balance, $10,000. So you would take 10,000 times 9%. This is going to give you the annual amount that you will pay. The APR, y'all have heard the annual percentage rate, right? The APR would be right here. So if we take 10,000 times 9%, that is $900. So 900, if this account now sit at 10,000 for the whole year, okay, 12 months, you're going to pay $900. But Velocity Banking has made a way, and we are super excited because this $900 divided by 12 if you're just wanting a monthly rate. So I'll do that a lot. You'll see me say, okay, it's $75 per month. Every month it sits at $10,000, right? Now, if you want to get the true daily rate, which if you want to get really, really detailed with what interest that you're paying, you would take the 10,000. Well, we already did 10,000 times 9%, 900, but take the 900 divided by 365 days, okay? So if you divide 900 by 365 days, because we have 365 days in a year, that means you're paying $2.46 in interest every day, okay? So then you would take the 246 times 30, and that would give you your actual monthly, which is 73.80. So when I do it just dividing it by 12 like I did here, that's an average, but this would be an actual $73.80. Now, how we win with Velocity Banking when we're using lines of credit, and you've probably heard me say it's a 9% rate, but you're really not going to be paying 9% because we're revolving the account. I revolve mine every day. You may revolve yours every week if you're paid weekly. You may revolve yours every two weeks if you're paid biweekly. So let's talk about that. We're still gonna be dealing with that $10,000 at a 9% rate, okay? So 10,000, 9%. We're still using a HELOC. So you make $1,000 a week, all right? So you would put your $1,000 into this account, bringing it to 9,000. So this is income for one week if that's what you make. I'm just using an example here. So the average, if you're gonna figure what's your average daily balance right here, you would say 10,000 plus 9,000 equals 19,000. Then you're gonna divide that by two. Now, this is just basic math that you learned in elementary school, and I hated math with a purple passion. I still, to this day, I think that I figured it one time, and it was like 12,462 days since I graduated from high school, and I've not yet used algebra, okay? That's just, I was not an algebra fan, and I've never had to use it, thank the Lord. So just saying, that was a waste of my time. I have used geometry because I have to have that when I'm using ultrasonic sound on metal, trying to figure out where defects are in it, and you do have to use geometry there, but never algebra, okay? Never had to figure out what that blank number was there. So 19,000 divided by two is 9,500. So $9,500 would be your average daily balance. Now, the bank does this for you, so you will never have to figure out what your average daily balance is, but you may want to figure out what your interest is gonna look like for the month if you're that detailed into your velocity, okay? So the 9,500 then would be taken times this 9%, and let's see what kind of difference that makes. So 9,500 times 9%, so the average daily balance, 9,500 times 9% equals $855 for the whole year. Remember, this would be your APR. Now, your 855 divided by 365 days, because we're getting a daily rate now, is $2.34 each day that you let the balance set. That's so important because if you have ever read the comments on YouTube, they will drive you nuts because first off, people don't understand how interest is charged. And they'll say, well, I don't know how you're getting, like in this situation, it would be $70.29. If we took that times 30 equals $70.20. So one more thing before I talk about what they say is just taking it from 10,000 down to $9,500 average, you're saving, what was it, $3 here, because it was 73 something before, I'm figuring it here. Now, $3 isn't a lot of money, but is it? And if you're dealing with bigger numbers than 10,000, if you've got a first lien HELOC, you can see how this average daily balance makes a true difference on how much of your actual income is paying down your balance instead of going to interest. So on this little amount here with 1,000 going in a week, and then bringing it down to 9,000, giving you an average daily balance, knocked off $3 plus. So if you're dealing with a whole month here, you know, when you have your expenses coming back out here, another thing that people aren't aware of that I've noticed is your expenses, let's say you even have $8,500. If we're putting in 1,000 a week, let's say you make 4,000 a month. So let's make this a four, because we're gonna go into a month. So this is for the month, 6,000. So you make that once a month and you put in the 4,000, bringing you, you're hitting the line, you're dropping it to 6,000. Then let's say you have 5,500 in additional expenses that are going to come out throughout the month. So when I do a board, I show 3,500, because we only put in 4,000. So 3,500 in expenses would come back out, bringing you back up to 9,500. But what people don't realize is the 3,500, when I'm doing a board, I'm just showing it for the month. This is coming out in daily amounts, maybe. Maybe you paid Netflix $25 today. Maybe you go get gas in your car for $50 tomorrow. Maybe you go get groceries the next day at $100. This is slowly building back up. That's what makes the average daily balance so important to us, is because this is a slow build. Once your money's in here, and even if it's that original 1,000 that I showed for the week, you may only have $400 come out in that week, meaning that you have kept this balance below $10,000 and you're not even doing anything like a payoff. You're just putting your income in there and letting it sit until you have to use it. That's how Velocity Banking saves us on interest, is because we're keeping this line as low as we can until we need it. I remember when I first started doing Velocity Banking using credit cards, I would try to put off charging back onto that credit card until I absolutely had to. So I would do the, say, it was a $700 card, so I would put $700 in it when I got paid, and then that would cover my gas, for example. So I would wait until I had to get gas, and my car at the time only took like $25 to fill it up. So that was adding $25 a week, let's say, to that one card the way I was using it, which was keeping it like the card was almost paid off all the time, right? And then the next week, whatever the balance was, then I would pay it off again. So Velocity Banking, even though I just had, I think I had a $1,000 and a $700 limit card at that time, and I was paying it off. Every time I got paid, I would just throw the money in there, knock the balance back down to zero, and then charge back out as I needed. That was such a game changer for me. That was amazing, because I had run those balances at the limits for, I don't know how long, a year, two? I don't know, however long I had the card, I charged it up immediately, and I just was making minimum payments, which was doing nothing but paying interest. So I was throwing that, even if it was $25 a week, or a month, I was throwing it away. That's where Velocity Banking completely changes this game, because now you're putting money into your line, or into your credit card, or whatever you're using, and you're knocking back that interest.