How does the Accelerated Banking Strategy work? And Why?

So how does the Accelerated Banking Strategy Work?

It’s not magic… And it’s no gimmick.

It’s just math!

Accelerated Banking relies on using a revolving line of credit which gives us additional features that the traditional mortgage does not.

Line Of Credit

First things first, a line of credit is revolving. This means that you can borrow money, pay it back, and reuse the principal portion of the line of credit again. In fact, your credit card is a form of a line of credit. You have a set limit on a line of credit and you only pay interest on what you use – not the entire limit.

So this ultimately gives us the flexibility to borrow, pay-back, and re-use as long as the line of credit is open.

Because of the revolving nature of the line of credit, the banks will typically charge the interest on a daily basis depending on what the balance is for the day.

So if the balance is $10,000 at 6%, the interest you would pay for the day is $1.64. Same would be true tomorrow if the balance remains the same. However, if the balance decreases to $5,000 next day, the interest charged on the line of credit would only be $0.82

Here’s Where the Savings Come From…

Now, one option that is available with the line of credit is that you can deposit your entire income and savings into the line of credit to lower the balance. But… you still have the ability to draw the funds out of the line of credit to take care of your living expenses.

Suppose it’s the 1st day of the month. You deposit all of your income into the line of credit. The balance would decrease and so will the interest charges, correct? The strategy relies on the fact that your balance will stay low for a long period of time. Ideally, you want to delay any draws out of the line of credit so we can take advantage of the low balance for a long period of time. Preferrably 21-30 days.

We can do this by using the Hybrid Method to delay any expenditures out of the Line of Credit directly.

By saving money on interest this way, we can take the funds that we would have to interest and apply to principal which also decreases the time paying off the debt.

Can Everyone Pay off Their Mortgage in 5-7 Years?

Now, keep in mind that the “5-7 year” mark is simply an average. This is based on average scenarios only and does not constitute what happens with every situation that this strategy is applied to. But when done correctly, this strategy can certainly help reduce the overall interest and time spent on the traditional methods.