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Velocity banking is a debt repayment strategy that uses a revolving line of credit, such as a HELOC, together with your regular income and monthly cash flow to reduce debt more efficiently. Instead of allowing income to sit in a checking account, deposits are used to temporarily lower the line-of-credit balance, reducing the balance on which interest is calculated. The strategy also uses periodic "chunk" payments to reduce mortgage principal while systematically repaying the line of credit over time.

Whether velocity banking saves money depends on factors such as your cash flow, interest rates, loan terms, fees, and spending habits. This calculator lets you compare velocity banking with traditional repayment methods using your own financial information so you can determine which approach performs best for your situation.

A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the available equity in their home. Unlike a traditional mortgage, where you receive one lump sum and make fixed payments, a HELOC works much like a credit card. You can borrow, repay, and borrow again up to your approved credit limit during the draw period.

One of the key features of most HELOCs is that interest is calculated using your average daily balance rather than a single monthly balance. Each day, your lender records the amount you owe. At the end of the billing cycle, those daily balances are averaged, and interest is calculated based on that average. This means your balance can change every time you make a deposit, pay a bill, or borrow additional funds.

Because interest is based on your daily balance, reducing your HELOC balance earlier in the month can lower the amount of interest charged during that billing cycle. This is one reason a HELOC is often used in velocity banking strategies, where income is deposited into the line of credit as soon as it is received, temporarily reducing the outstanding balance before expenses are paid.

Not all HELOCs have the same terms. Interest rates are often variable, lenders may charge annual fees or closing costs, and repayment requirements can vary. Before using a HELOC as part of any debt repayment strategy, it's important to understand your lender's specific terms and conditions.

Our calculator models the movement of money into and out of a HELOC while estimating average daily balances and interest charges. This allows you to compare different repayment strategies using your own financial information and better understand how timing and cash flow can affect the overall cost of borrowing.