What is the Infinite Banking Concept?
The core concept behind infinite banking is to use a whole life insurance policy as your own personal “bank,” which you can use to cut interest costs and build wealth.
If you’re wanting ways to separate yourself from institutions and feel more financially independent and sustainable, this intriguing infinite banking concept is well worth a look.
What is the infinite banking concept?
If it’s still not sticking, the idea is to take out a whole life insurance policy which lets you use the money you put into the policy to build wealth. That policy then serves as your own personal bank, giving you more control and interest-saving opportunities at your green fingertips.
How? The policy is paid for with taxed money, so you pay taxes first. Any loans taken from that policy are tax-free! So, with a simple upfront investment, you can have your own personal loans within reach.
So instead of storing pennies in a piggy bank or at a brick and mortar bank, you keep the bank in your own hands — and, while you can still use it for when times get tough, you can also dip into it as a way to make investments and achieve your financial goals.
The best, best, best part of the infinite banking concept is that it allows you to build compound interest on the money invested. And that money is yours to use as you see fit — no credit checks or use of funds requirements.
An example of the infinite banking concept
An infinite banking concept example in action would be putting $50,000 into a whole life insurance policy. You would pay the monthly premiums over time and watch as the “cash value” (the amount you can take out in a loan) increases.
Depending on how much money you have put away in your account, you can then look into possible investments or financial moves to increase the capital you’ve already put in.
For example, you could take out a loan to pay for a rental property. The tenant in that property pays the mortgage, and then some, which pays back the loan — all without high interest rates, and typically with a profit margin on top. This is how you can use the concept to create an “infinite” cash flow.
The infinite banking concept
Before you get started on the infinite banking concept, there are some barriers to entry worth considering.
1. It takes time
A lot of whole life insurance policies can take 5-7 years to break even, meaning it can take 5-7 years for you to cash out with that personal loan.
2. Interest rates apply to the loans
For the most part, an interest rate will apply to the loan you take out. But as long as this interest rate is less than typical loans, or doesn’t take your entire profit margin (let’s say for that rental example), it still can pay off.
3. You need a trustworthy policy provider
Work with a trustworthy insurance company and/or advisor. Many online communities offer help and advice on how to practice infinite banking carefully and wisely.
Infinitely banking
While it may not be exactly what it sounds like, the infinite banking concept is a sound option for anyone wanting new ways to expand their money-saving and financial stability. Lots of other money saving lifestyle changes and tune-ups are here.