Debt Crusher – Velocity Banking Tool

What is Velocity Banking?

Velocity Banking is a debt payoff strategy that uses a line of credit to accelerate debt elimination. Instead of making small monthly payments, you make large "chunk" payments at strategic intervals.

How It Works:

1. Get a Line of Credit: Credit card, HELOC, or personal line of credit (PLOC)
2. Make Chunk Payments: Use the line of credit to make large payments
3. Pay Off Line of Credit: Use your regular income to pay off the line of credit
4. Repeat: Continue until debt is eliminated

Key Benefits:

• ✅ Faster debt elimination
• ✅ Reduced total interest paid
• ✅ Psychological momentum
• ✅ Flexible payment timing

⚠️ Important Risk Warnings:

• Credit Score Impact: High credit utilization can lower your score temporarily
• Interest Rate Risks: Variable rates on lines of credit can increase
• Discipline Required: Must maintain strict payment schedule or risk financial disaster
• Emergency Fund: Never use emergency savings for chunk payments
• Job Security: Requires stable, reliable income source

✅ Prerequisites & Requirements:

• Credit Score: Minimum 680+ for best rates (720+ preferred)
• Income Stability: Consistent, verifiable income for 2+ years
• Debt-to-Income: Maximum 43% DTI ratio for approval
• Emergency Fund: 3-6 months expenses saved first
• Documentation: Tax returns, pay stubs, bank statements

📋 Pre-Velocity Checklist:

1. ✅ Build emergency fund (3-6 months expenses)
2. ✅ Improve credit score to 680+
3. ✅ Calculate all monthly obligations
4. ✅ Get pre-approved for line of credit
5. ✅ Create detailed budget and stick to it
6. ✅ Have backup plan if income changes

📅 Monthly Implementation Workflow:

1. Week 1: Make minimum payment on debt
2. Week 2: Save money for chunk payment
3. Week 3: Continue saving, monitor progress
4. Week 4: Make chunk payment (if scheduled month)
5. Ongoing: Pay off line of credit monthly

📂 Scenario Manager

Use the Scenario Manager (above the calculator) to save different plans and compare them later.

• Save Scenario: Enter a descriptive name (e.g., “Aggressive Q2 Plan”) and click Save Scenario.
• Load: Prefills the form with the stored inputs so you can review or tweak them.
• Run: Loads the inputs and immediately recalculates so you can compare dashboards back-to-back.
• Delete: Removes that entry from the list.
• Clear All: Wipes the library if you want to start fresh (data is stored in your browser only).

❌ Common Mistakes to Avoid:

• Overextending Credit: Don't max out your line of credit
• Missing Payments: Late payments can destroy your credit
• Poor Timing: Don't start during job uncertainty or major expenses
• Ignoring Fees: Watch for annual fees, balance transfer fees
• Not Tracking: Monitor progress monthly and adjust as needed
• Emotional Decisions: Stick to the plan, don't deviate

🎯 Advanced Strategies:

• Debt Prioritization: Target highest interest debts first
• Seasonal Bonuses: Use tax refunds, bonuses for extra chunks
• Scaling Up: Increase chunk amounts as debt decreases
• Multiple Debts: Focus on one debt at a time for maximum impact
• Goal Setting: Set realistic 12-24 month payoff targets

📱 Recommended Tools & Resources:

• Budgeting Apps: YNAB, Mint, or EveryDollar
• Credit Monitoring: Credit Karma, Experian
• Debt Tracking: Undebt.it, Debt Payoff Planner
• Education: Dave Ramsey, The Money Guy Show
• Community: Reddit r/personalfinance, Facebook groups

Input Guidelines:

• Minimum Payment: Must be at least equal to monthly interest
• Chunk Payment: Should be 2-3x your monthly payment
• Chunk Months: Space payments 3-6 months apart
• Line of Credit: Choose based on your credit profile

📊 Reading the Dashboard

• Summary Cards: Highlight total interest/fee savings, months removed, and the fee load of the recommended plan.
• Cash Flow Timeline: The blue line is debt service; the green line is the cushion that’s left. Watch for months where the lines cross.
• Risk Guardrails: Flags high DTI, tight cash flow, small emergency funds, and chunk amounts that exceed your LOC limit.
• 90-Day Action Plan: Converts the recommendation into a checklist (chunk schedule, automation, savings goals).
• Strategy Tables: Compare total cost, months, and cash cushion across each payoff approach.

Example Scenario:

Debt: $50,000 at 15% APR
Monthly Payment: $1,500
Chunk Payment: $3,000 every 3 months
Result: Pay off 2-3 years faster!