27 Apr Miscellaneous Questions About CashMap’s Line of Credit Strategy
You’ve selected your financial institution, they’ve approved your line of credit, you’re using Your Next Step Checklist and you’ve about set up your new system that will start saving you thousands of dollars. Congratulations!
You’ve thought of a couple more questions. Let’s answer them!
My bank won’t let me make a mortgage payment using my line of credit. What should I do?
Remember banks encourage consumers to use a line of credit as a way of creating interest payments. The examples they use to encourage people to use their line of credit are not in your best interest. Their goal is to increase your debt and keep you from achieving your dreams. If they successfully “sell” a line of credit, they must have policies in place to prevent you from defaulting on larger loans such as mortgages. Consequently, they don’t want customers using debt to pay off other loans held by their company.
This makes their rule understandable. They’ve not thought for a minute that a consumer will use their line of credit to get out of debt. So, what’s a simple way to solve this problem?
Since you can’t make a payment from your line of credit directly to your mortgage, withdraw the dollars from your line of credit and deposit it in your checking or savings account. Once this is done, make your mortgage payment from either your savings or checking account. You should be able to automate both steps.
What happens if the dollars I have left after I pay my bills changes?
Remember, this system is easy to use. Consequently, small changes in your monthly cash flow (This is the amount of money you have left after you pay your bills.) won’t make a big difference. Use CashMap to create a new personalized scenario with your updated solution.
What happens if I don’t update my personalized CashMap solution?
As your positive cash flow increases, you will hit the target balance on your line of credit sooner enabling you to make additional line of credit withdrawals and additional loan payments more frequently. You will pay less interest from your line of credit; however, you are missing an opportunity to realize greater loan interest savings.
If your positive cash flow has gotten smaller, the opposite happens. When it takes longer to make additional withdrawals and additional loan payments, this increases your line of credit interest payments while missing the opportunity to save loan interest payments.
You have two possible solutions. First, after you create your new CashMap solution, allow your positive cash flow to lower your line of credit balance to your new lower trigger amount. The second option is to withdraw enough from your savings to lower the balance to the lower trigger amount. Unless there has been a dramatic reduction in your positive cash flow, this would not be my choice. If the drop in your positive cash flow will last for just a month or two, I wouldn’t touch savings. However, if you’ve reviewed your budget and you don’t see your situation improving quickly, consider making a withdrawal from savings.
What do I do when my loan is paid in full?
There’s nothing but good news! Continue moving your income to your line of credit until the line of credit is paid in full. This will take approximately two months. As I mentioned in my last post, you can use CashMap’s line of credit strategy for investing. I’ll provide an example in a future post.
Ready to start your journey towards financial freedom? Get started today!
I’d love to hear from you. Please send your questions, topics or suggestions to firstname.lastname@example.org. You can also follow me on twitter at cash_map.