What do you know about the infinite banking system? If you’re like most people, you’ve probably heard several critiques and dismissals of it. You might’ve even heard it’s a scam.
The truth is far more complicated. The infinite banking concept, though it does have its drawbacks, is a viable financial option. If you find yourself facing unexpected financial situations, such as medical bills or a death in the family, infinite banking may be the solution.
Interested in learning more? If so, then you’re in the right place! In this article, we’ll explain how infinite banking works, what its advantages are, and some potential drawbacks. Let’s get started!
What Is the Infinite Banking System?
Many people have never heard a full explanation of how infinite banking works. Most of the critiques against it misunderstand it, equating infinite banking with a whole life insurance policy.
The infinite banking system essentially allows you to become your own banker. First proposed by Nelson Nash, this idea works by using cash surrender values in whole life insurance policies as collateral for loans.
This works because whole life insurance covers the entirety of one’s life, rather than focusing exclusively on helping loved ones recover financially from one’s death. As such, policies may pay out dividends.
So, as your own banker, you take loans out of the policy by using the policy itself as collateral.
There are several advantages to infinite banking. The most significant benefit is without doubt the tremendous increase in cash flow. The money you use from your whole life insurance policy possesses far more liquidity than the equity you hold in other investments.
You can secure loans far more quickly and have the cash on hand to pay your expenses. A traditional bank loan can’t compete with this speed.
Furthermore, it can’t compete with the interest rates, which are much lower in infinite banking. If you don’t believe us, check out an infinite banking example.
Moreover, these loans have no connection to the stock market. Because of this, they will more securely retain their value than bank loans.
Infinite banking is not a one-size-fits-all solution to financial problems. Several drawbacks exist that you should consider before deciding on this method. First, you have to qualify for a whole life insurance policy.
Without this policy, the entire concept falls apart. The trouble is, these policies aren’t the easiest to qualify for. Even if you do, you must be able to maintain payments on the policy.
Most experts recommend putting 10% of your income into your whole life insurance policy, which many families can’t afford. Because of this, this strategy only works if you can strategize well with your finances.
Decide If Infinite Banking Is Right for You
There are several tools you can use to help you decide if the infinite banking system is right for you. You can utilize an infinite banking calculator or infinite banking software to keep track of payments and what you can afford. Ultimately, the decision is up to you and what you feel comfortable with.
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