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3 Reasons to Take Life Insurance Loans vs Using Cash

On Page 49 of his first book, economist Mr. R. Nelson Nash explains why the Infinite Banking Concept should be expanded to accommodate all income. He states, “When he builds a banking system through life insurance, makes loans to himself to buy automobiles- and pays back to the policy (or policies) the same payment he would have paid the banking institution- then he makes what the banking institution would have made off of him. And it is all done on a tax-deferred basis!”


The 87-year-old famed economist and founder of The Infinite Banking Concept understands the benefits of financing life’s items through life insurance loans, not cash. Do you?


Spending cash IS generally a better way to finance life’s items (compared to going into debt). The unfortunate truth is that, even when spending cash, there is an opportunity cost associated. Though this opportunity cost may not seem like much on the day of purchase it can and will add up to a hefty amount after 10, 15, 20 or 30 years.


These are our top 3 reasons for taking life insurance loans vs. paying cash or using a bank for a loan. These loans include everything from cars & mortgages to annual taxes & investment opportunities.


1. Control of the Repayment Schedule

With this feature you control the amount you payback, the interest rate you pay (1) & the payback schedule.  It is in your control & determined by you. Let’s look at some typical financing options & their repayment cycles below.


A. Bank Loan  


What would the loan officer at a bank say if you told him you wanted to skip this months payment on your second office building? How about if you told him upfront that you wanted to skip all of year 3 payments? In this scenario, the control of the repayment schedule is, clearly, not in your hands.


 B. Paying Cash   


If you were a cash spender than you would be replenishing the account used for the next purchase, correct? Therefore, yes! The control of the repayment schedule is most definitely up to you.


C. Life Insurance Policy Loan   


Assuming that the provision of the contract allow, the policyholder controls the loan repayment schedule within a whole life insurance policy. When working with a Certified Infinite Banking Practitioner, the needs of the policy owner will reflect the amortization repayment schedule. Loans can typically be repaid via mailed check, monthly EFT, or lump sums.


2. Uninterrupted Growth of Account

A. Bank Loan   


When you take a loan from a bank the money in a separate account DOES continue to grow. If it is a checking or savings account it may not be growing at an impressive rate but, nonetheless, is still growing. More on this in a video, later.


 B. Cash  


When you empty your account of cash to finance one of life’s necessities you empty the bucket of savings dollars and start back at $0. Any dollar of interest that the cash spent could have earned you is now gone. This is known as lost opportunity cost.


 C. Life Insurance Policy Loan  


When policy owners take a policy loan the insurance company uses the cash value of the policy as collateral against the death benefit. Therefore, policy owners have access to the cash without actually withdrawing it from the policy. This allows the account to continue to grow at the guaranteed rate while you utilize the cash inside of the policy. If the insured were to die with an outstanding loan, the loan balance is simply subtracted from the income tax-free death benefit.


3. Always, Always 100% Guaranteed Approval for the Loan


When you truly need the money will you have access to it? For example, in 2008/2009 many real-estate professionals & developers saw HUGE opportunity in the real estate market, but had trouble getting loans from banks to bite on the opportunity. They needed a liquid account at that time in order to take advantage of the market.


 A. Bank Loan  


As discussed above, the bank chooses whom they do business with. Sometimes, even regardless of your credit score, you may not be able to qualify for a bank loan.


 B. Cash    


Technically, when you spend cash you are loaning the money to yourself then repaying yourself to replenish the account. If your cash is in a liquid account (i.e. savings/checking account) then you will be “approved” to use the cash.


 C. Life Insurance Policy Loan  


A life insurance policy is a contract between two individuals: the company and the policy owner. Assuming that the provision of the contract allow, policy owners have access to cash via loans throughout the life of the policy.


 To learn more about how we implement the process of taking life insurance loans vs. using cash or taking loans from a traditional bank reach out to our team today.

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