How does Accelerated Banking work?

There are two things that make our strategies work. One is the fact that we’re going to use a simple interest loan to pay down debt, as opposed to an amortized loan. The other is that we will use all of our income to drive down debt and, therefore, will drive down the interest required to be paid each month.

An amortized loan calculates the interest over the life of the loan and adds it to each month along with the principle payment. That obligation is the same throughout the life of the loan. As you’re paying your monthly bill, some will go towards principle, some towards interest.

With a simple interest loan, your interest is calculated based on the daily balance. By driving down that balance with all of your income, you will lower your monthly obligation, aka, the interest.

Were you to just put all of your free capital towards your mortgage, that will work. However, if an emergency happens, you no longer have access to that money. With a HELOC, you can always access what you’ve put into it. Will that slow your progress? Of course, but you use that money only when you need it and in the meantime it’s holding your balance lower, which reduces the amount of interest that you pay.