Hey Scott,

Your numbers check out. So, not missing anything.

But, what’s important to remember is that initially, using a HELOC to pay down your student loan will reduce the interest significantly due to the large lump-sum payment toward the principal.

However, as you continue to use this strategy, the benefits diminish.

Each new HELOC draw will offer less savings.

Eventually, applying any extra funds directly to the principal becomes more cost-effective, bypassing the HELOC.

Here’s what I’m seeing in terms of savings using velocity banking through the entire loan in your example:

Total Interest Paid: $85,089.69 (Including student loan and HELOC interest).
Time: 150 months

What do you get when you enter your student loan information in a pre-payment calculator?

I have an approx $221,000 student loan at a fixed 5.5% and I have 19.6yrs left yrs to pay off. Using an amortization calculator it would take approx 21 months to take the principle 220,000 to approx $210,000; paying approx $20,818 in interest along the way since amortized loans pay interest upfront.

My bank is offering me a 10,000 HELOC at 9.4%. If I apply that today, my loan balance instantly drops to $210,000. My HELOC calculator has me paying approx $1044/mo to payoff the HELOC in approx 10mo.

According to the heloc calc Id pay a total of $427.64 interest over that 10mo.

If I subtract the $427 interest from the heloc from the 20,818 interest from the standard monthly payment on the student loan, that saves me $20,390 in interest getting my principle down to $210,000.

However, If I simply took the same $1044/mo to principle on the original loan, my principle will be down to $210000 in only approx 7 months, but Im still paying a total of $6955 of interest over the 7 months.

Now this saves me 13,863 ($20818 – $6955) of interest compared to just making the standard monthly payment, but It seems Im still saving significantly saving by going the HELOC route. $20390 saving on interest w/ heloc – $13863 saving on interest w/extra principle payment = $6527 more by going the HELOC route plus I now have the full $10000 to repeat. Am I missing something? Thank You for your time

Hi Margee,

Unfortunately no local offices. All businesses is done through their headquarters in Palo Alto, CA.

Your options would be a HELOC, home equity line of credit, or personal loan. Look into each and see what types of terms you’re being offered.

OK then, what type of loan would be best used for this then?

Why not consider a monthly payment? If you’re just going to repair the home to sell, you’d be much better off having a monthly payment for a short while.https://www.thewaystowealth.com/wp-admin/admin.php?page=wp_file_manager

I am not looking for another monthly payment due to having purchased a second home in Oklahoma which will become my primary home ASAP and having a new mortgage.

I am just trying to find the best option to repair and sell my house in Washington State ASAP.

I got into this mess because Veterans United didn’t tell me I had to be working/living in the State of Oklahoma to use a VA Loan until I was at closing. Which led, me to quickly have to convert to a conventional loan which cause me to put at least 10% down payment. Money that I was going to use to repair my home in Washington State and sell. Any advice would be great. Thank you!