Bank Strategies 2/6 - Interest Float

Still working with scenerio #1 from HUB 1/6 - Canceling Interest Charges in this Bank Strategies series, I have gone over the differences between a mortgage or amortized loan compared to a HELOC (home equity line of credit) or other type of line of credit, like personal line or business line or secured line.

Now let's get down to how to actually use these two accounts as well as a credit card to pay off debt fast.

Let us begin with Mr. Homeowner earning a $5,000 income each month and having $4000 of living expenses each month. These living expenses include his $1199.10 mortgage payment, his utilities, his car payment, his food and entertainment, etc. etc.

But Mr. Homeowner wants to pay off his debts a.s.a.p. because he knows he cannot build wealth on one side if he is in debt on the other side, because they just cancel each other out.

And if his wealthbuilding strategy is investing in the volatile markets, he may end up with no wealth on the one side and still in debt on the other side, and wishing he had used his savings to pay off his biggest debt, his mortgage.

Rate versus Cost

There is only one time when going into debt is a good thing, and that is when the money you are borrowing, costs less than the cost of the money you will be paying down. Notice, I used the word cost, rather than rate. Because quite often, the borrowed money has a higher interest RATE than the money being paid down but the COST will be the other way around. The length of the time the money is being borrowed has an integral part in this math strategy. For more info. see the link below.

http://www.financialnavigationsolution.com/uploads/GEdwardGriffin.pdf

Where can Mr. Homeowner aquire $5,000 from? One way some people qualify for is to borrow the $5,000 from a cheap source, a line of credit and then using Interest Cancellation and Interest Float bank strategies. Mr. Homeowner now understands the differences between his mortgage and his heloc and will now learn how to use these accounts to his advantage.

(Please note that I will go over how to do this without a heloc, ploc, sloc or bloc in a later hub.)

If Mr. Homeowner borrows $5,000 from his line of credit for 30 days, for each day that he owes that $5,000 he will be charged interest @ 10%.

If he does not pay any of it back over the first month he will be charged $41.66 in interest charges for that 1st month and for each month after that until he pays it off. $5,000 x 10% = $500 / 12 months = $41.66. This is how most people use their Lines of Credit. They spend the money then make interest-only payments for long periods of time.

However, what if Mr. Homeowner on the same day that he is paid $5,000, decides to deposit all his income for the month into that HELOC. What happens? Obviously the balance in his HELOC is now back to zero, and if he keeps it there all month, he will be charged zero interest, right? This is called Interest Cancellation.

But, how is he going to pay for his monthly expenses. Let us now bring a credit card into the scenerio.

If you buy things using a credit card to pay for them and you pay off the balance of that credit card on the due date, usually 30 days later, you are charged NO interest. This is called Interest Float. You just used Mr. Credit Cards money for 30 days for free.

So if Mr. Homeowner buys his monthly goods and pays his utility bills and let's say in a perfect world he could also pay for his car payment and mortgage payment with the credit card also. Hasn't Mr. Homeowner just borrowed $5,000 from his HELOC for free?

If he uses his credit card to pay for his monthy expenses and with his next month's pay cheque, pays off the credit card so he is charged zero interest on that card. And he cancels all interest charges on his HELOC by depositing his whole pay cheque into that account. Hasn't Mr. Homeowner just borrowed $5,000 from his HELOC for free? Can't he now pay, as a principal-only payment to his mortgage, that $5,000 saving himself $23,304 of interest charges and 22 months of mortgage payments?

.

So after one month Mr. Homeowner is beginning month two with

*zero owing on his HELOC,

*zero in his cheque account,

*$5,199.10 equity built up on his home, instead of just $199.10

*owing 194,800.90 instead of owing 199,800.90 on his mortgage.

*$4,000 owing on his credit card from his monthly expenses, which will be paid off with his next month's pay cheque.

*possibly accumulated cash-back rewards or frequent flyer miles for using his credit card to pay for his living expenses all month. 

*interest savings of $23,304 on the back end of his mortgage which cost hiim $5,000 of interest free money. AND

*shortened his mortgage term from 360 to 337 in just one month.

Do you think Mr. Homeowner is jumping up and down for joy by now!!!?

Do you think Mr. Homeowner would want to continue doing this as often as possible each year until all his debt was paid off?

The Mr. Homeowner scenerio is just one scenerio to show you how we can use the same bank strategies the banks use but to our advantage.

I know that every day, week, month, year our financial circumstances change. Nothing ever stays the same. Take food and gas prices as an excellent example of that. Not every bill can be paid with a credit card either.

Not only that, not everyone has a mortgage, not everyone can qualify for a HELOC etc. etc. It is for this reason that a real-time, educational, coaching, financial tool is necessary to help the average citizen pay off their debt fast.

My next 4 HUBS will be going over 4 more bank strategies that we can utilize to our advantage along with these first two, Cancelling Interest Charges and Interest Float.

Get an INSTANT SAVINGS QUOTE HERE, right now.

If you are interested in finding out about a system that incorporates the 6 bank strategies in this series, all at once, creating an awesome debt elimination, wealth building, real time, financial tool, click on the Financial Navigation Solution.

See you at my next HUB - Bank Strategies 3/6 - Interest Accumulation.

(Jennifer Bhala Hansen is new to internetsocial networking. But, if this hub article has been interesting or helpful to you, a thumbs up rating would be much appreciated!) Thanks.

This hub post holds the intention of helping all who read it to learn, research, grow, and love our fellow humans/animals.

Information provided here is for EDUCATIONAL PURPOSES ONLY and is in NO WAY intended to replace proper financial advice. IT IS NOT to be construed as instruction on how to pay-off debt or overcome any financial situation the reader may be in.

Every individual is different, thus what may work for one may not work for another person. The writer of this hub post will not be held accountable in anyway if and when the reader of this hub post chooses to apply the information they read for their own personal use. Consult with the professional financial authorities of your choice.

Remember, taking responsibility for your own wealth is your own personal decision: do your research and choose wisely. I commend you!