How To Use A Line Of Credit

now we're at the fun part where we're gonna dive into a scenario here we're going to put all the information together and really run these numbers to see does this thing really make sense or is this kid crazy in the head I want you to be the judge of that let's look at all the numbers here here we go here's your four major numbers your income expense debt cash flow okay let's just say these are your numbers we got the debt tool from over here a line of credit 10k thirteen percent it's rough its revolving simple interests wonderful unsecured no collateral wonderful we have a debt 100 grand here's the breakdown hundred thousand dollars five percent amortized loan 20 years call that student loans okay here's how your monthly payment is broken down okay your monthly payment is 650 996 on the 5th of every month okay and you have interest 416 dollars sixty-seven cents so of the 650 996 416 67 straight towards interest P is principal money that's actually paying off the hundred K two hundred forty three dollars and twenty nine cents is going towards principal of the 650 996 the goal is how do I get this back into my pocket how do I get more of this 416 to come here to principal how do I do that okay the most common way that everybody I mean everybody teaches is to take this cash flow right here and to just make an extra payment every single month towards that okay if you did that you would save the very first month by putting an extra thousand okay towards your payment so a thousand plus two 650 996 you would save one thousand six hundred eighty four dollars and ten cents on that first transaction okay not bad I still own ninety eight thousand dollars ninety seven thousand dollars okay and you just keep doing that if you were to keep doing just that paying $1,000 extra payment every single month on top of the 650 996 you would pay off that debt in five point nine one years not bad okay not bad at all now is there another way is there a more effective way is there a more lucrative strategy to beat that okay because we want to go faster than that and the timeline is not the most important thing here okay at five point nine one years that's awesome that's a lot better than twenty right I'm sure you can agree with that okay here's the problem throughout these five point nine one years this person right here cannot do anything but just pay a thousand a month every single month four five point nine one years do you know how robotic that is how stressful that is to actually do that like to actually commit to do that you know how non-american you have to be like how much money you can't spend like you have to be so disciplined okay and people say velocity banking is heart listen in my opinion that might be the toughest thing ever did especially in this United States where where you are just being pressured to spend money every single day right so kudos to the person that does this okay and is happy after that five point nine one years because here's the other thing that you must solve for yourself is during these five point nine one years whether you're forty thirty five twenty five listen for the next five point nine one years you can't invest a single dollar into anything why because you're all your cash flow money left over after all expenses and bills and that's are paid all that money is going towards that right there the debt institution okay so over the next five point nine one years you cannot invest you can't save you can't I don't know how I don't know we're gonna get extra money from okay can't use my line of credit strategy sorry can't use that right because we're just making extra payments okay so something to consider when you're looking at your options whether to that snowball this thing or do some velocity banking so let's actually look at the other method I have this line of credit at 10k a thirteen percent all right let's say that I make a chunk payment I extract okay I take seven thousand dollars out of the line of credit okay all right we got the debt up here we got the line of credit here and you got your checking account oh my god we got your checking account right here so I took seven K out all right can I pay that guy pay their debt that very first month by paying seven thousand on top of your 650 996 is going to save you ten thousand nine hundred dollars and forty four cents of interest if we did that first month I saved ten down let me say they had ten thousand nine hundred dollars and forty four cents my friend over the next eight to nine months I'm gonna be ahead of this person no matter what I'm gonna be ahead of them because of how much interest I just saved up front because I just cut off the amortization calculator from amortized cut it off that's why it's so vital the very first couple years of every amortization debt it's so vital to pay off that debt in the very first couple years because of how much interest savings that we have now the next step okay after making that first chunk payment towards the debt okay is now we need to take your income of five grand let's say you get paid you're a teacher you get paid once a month okay on the fourth or on the fifth of every month to get paid all right and just so happens that on the fifth you have that monthly payment as well okay so let's say we took out the chunk on the fourth okay it took seven K out on the fourth and paid the bill alright don't have to worry about it tomorrow on the fifth right you get your income of five grand lands into the checking account and what do you do make a beautiful little seamless transfer from your mobile a probable transfer that whole five K boom right to the line of credit so we originally owed seven thousand dollars okay when I put five K back in here's my balance 2000 $2.49 that's the balance how did I get that little extra for a cost right there 7,000 times 13% nine hundred and ten dollars in interest for the whole entire year which is better nine ten for sixteen monthly nine ten yearly for sixteen monthly and you mean to tell me that there's no difference between amortize simple interest am I crazy in the head or is it just pure math okay tell me work with me here thirteen percent nine ten now since the interest is calculated daily am I paying that nine ten today no so I have to take the nine ten divided by 365 o $2.49 a day for however long I have this seven thousand outstanding for am I gonna have the 7 k outstanding for 30 days no I'm gonna have it outstanding for how many days one day I get paid well that's one balance now let's say every single week you spend a thousand bucks that's how your bills work out you pay a thousand bucks okay all your income is in the line of credit so what are you gonna do you're gonna take another thousand bucks out each and every week you can do it all at once do I recommend that no I recommend looking at it daily right or every three to five days pretty simple choose one see which one works for you okay or just go with the thousand it's not gonna kill you alright this is gonna save you more interest obviously and that's just gonna you know make it a little bit easier you don't have to log into your account every single day and that's just pretty you know straightforward if that's how much money you know you're gonna spend each and every week well then you just pull that out let it in a checking account pay the bills all right and then all the rest of your money seeing sitting in the line of credit keeping the balance down okay so let's say one week seven days okay you take out a thousand here's your balance it went from three they went from two thousand to forty nine now it's at three thousand $9.97 okay so we had some interest costs there would you agree yes which is better couple dollars couple hundred break it down okay now do it again now the week goes by all right here yeah another week goes by took out another thousand look where your balance is four thousand 1996 boom another seven days we're in fifteen days into the month and we keep going take out another thousand right you keep taking out money as you need it why because all your money's in there already from your income from the beginning of the month all your money's in there you're just taking out what you need okay what you don't have to worry about is a monthly payment on the line of credit you don't have to worry about it matter of fact it's not even an expense why you're five thousand already paid for the monthly payment for that month and then that same money is being used twice to pay all your bills pretty interesting huh so look we keep going balance took out another kay boom took out another Kay boom so we went from seven all the way down to two all the way back up to six Kay the difference is the cash flow does that make sense you paid forty seven dollars and 53 cents in interest again which would you rather pay $47 four hundred dollars okay you choose understand that when I made this $7000 chunk this drops okay the very next month this drops quite a bit okay if I went the extra payment route this drops maybe 10 bucks maybe 15 bucks doesn't drop a lot okay yeah you saved 1,600 bucks but which how much would you rather save 1,600 or damn near 11 grand not bad not bad my friend my friend that's interests that's interest savings okay not principle that's interest savings on that hundred K you imagine how much interest you would pay if you did nothing but just pay the 659 over 20 years oh my god you would pay probably 60,000 and interest you feel lucky if you're lucky okay so that's what one month looks like 7k chunked io 7 K on the line of credit all I did was shift debt from that high interest to no interest okay or very little okay to keep that number small what did we have to do put all our income into the line of credit why would I do that and not just a thousand again by you just putting in cash flow now you're gonna be paying what thirteen percent interest at nine ten divided by three sixty five to forty nine okay you're paying interest on six thousand over the next 28 days you don't want to do that okay that's why we dump all the income and income in so now that was your balance month one okay so we could safely say if you're putting in five thousand each and every month by month the three four okay you would have technically zeroed out the line of credit and now all you're doing is extracting the money to pay your bills okay my recommendation very conservatively looking at this you can make a seven thousand dollar chunk every five every six months okay and that loan would be paid off in four years so almost almost two years better okay but like I said that's not the most important part here okay the time line is not the most important part what's really important is the use of this cash flow did you know that this person can save invest and spend money all three at the same time how how is that possible well consider this you've been using the bank's money to pay off another institution right in the process of doing that credit score Rises your credit worthiness jumps what do you think this credit union is gonna do for you what do you think this credit unions gonna do for you they're gonna increase your line of credit you could do it once a year or you can let them do it for you alright I'm pretty sure they'll do it right every like year so they'll just give you an increase so not only are we saving way more money much more money so much money in interest right not only not only are we saving so much money in interest just by doing this but we're also building our credit score which is gonna give us access to more capital so that when this is paid off and when my cash flow was six hundred and fifty nine dollars and ninety six cents dollars more okay like sixteen hundred cash flow okay in the process of paying off that hundred thousand using the bank's money technically I never lost this I never lost it right it's gonna be right here in the line of credit we might have a line of credit over the next four years we might get that line of credit somewhere around forty to fifty grand could we not forty fifty grand we could potentially have maybe two or three credit cards under our belt you know ten K each maybe I mean we we could we could have so much opportunities available more debt more good debt to leverage here very interesting very interesting gets me excited when I work with people's numbers and I'm breaking it on the board and just breaking it down day by day month by month week by week just really showing it out really just displaying numbers and really really shedding a light on your personal finances right cuz this is all is look this is all we're just we're just talking about your personal money we're not even talking about investing and making money do you know how exciting it is to do velocity banking to make money to invest money you think it's exciting to become debt-free doing velocity banking wait till you have options wait till your cash flow is 50% of your income wait till that occurs wait till you have options where you can say alright I want to I want to throw some money in crypto you know what I just want to throw some money in the Forex I want to throw some money on a property I want to throw some money on my kids so they can start a new business or send the college right you not to worry about that anymore debt right cuz that's completely wiped out and you did it in a much shorter timeframe than the other method which is the benefit okay that's a clear benefit we also save thousands more in interest than this method which is hence why we paid off the why we got a faster timeline okay and the other thing the thing that I like most is I never I never lost that I never lost that all I did was leverage the money first okay and then I placed that money over here to let it sit there so I never lose that money in the form of interest because when I take this money and I when I take this cash flow my cash and I send it to a debt directly understand that this money you can never get it back once you put that extra thousand into that hundred you're never gonna get it back you can't recoup the money the only way to recoup the money is to make more money or to spend less money or to you know cut back and do whatever it is that you got to do but see in our case when we're leveraging other people's money first and then just using our money to pay ourselves back okay this is a form this is a strategy of literally becoming your own bank right now you're learning how to become your own bank you're learning how to leverage cash flow leveraged income leveraged expenses minimize eliminate reduce interest costs okay let me tell you if that is dis did not sink in over the whole series that I just did on lines of credits okay this is literally all for you alright take this in absorb it let's work together let's build something let's build a kingdom together do you want to build a kingdom with me listen my name is Denzel if you're here for the first time welcome this is what we do all day long on our channel is we run numbers we build kingdoms we help moms become debt-free we help families all over the United States and abroad get their money completely their whole financial house in order okay in a short timeframe minimizing interests maximizing cash flow to get the results that we want again which is simply just to become financially free from debt from worry so that we can establish a kingdom that will last forever and establish that legacy okay for the family protecting your kids protecting your children I hope this was so informative if you want to work with me one on one check the description below I have services from coaching to velocity banking intensive programs to one-on-one sessions or if you want to just give financially to the channel you can visit my patreon page and there's a bunch of people giving right now financially making sure that I am able to deliver every single day to you guys making sure that this channel becomes successful that people all over the world are able to establish their Kingdom okay you have yourself a wonderful day god bless

Channel: Denzel Napoleon Rodriguez

Views: 127,673

Keywords: velocity banking, personal finance, line of credit, debt free, how to pay off debt, lines of credit, cash flow, finance geek, personal line of credit, credit score increase, velocity banking strategy, personal finance 101, velocity banking denzel, line of credit explained, denzel rodriguez velocity banking, denzel rodriguez credit card, denzel rodriguez, how to use a line of credit

Id: r3wXqlGPcUE

Length: 23min 43sec (1423 seconds)

Published: Mon Feb 25 2019