Michael Kitces’ Big Blind Spot on Bank On Yourself Policy Loans

In his review of Bank On Yourself, Michael Kitces repeatedly harped on the worst-case scenario of a life insurance policy owner taking out a life insurance loan with no regard for ever paying it back.

Kitces rightly pointed out there could be significant tax consequences if a life insurance policy were to lapse due to a large policy loan.

If the interest is not paid, it gets added to the loan balance. Eventually the loan balance could come so close to the cash value securing the loan that the life insurance company—after giving fair warning—would take the cash value to pay off the loan, causing the policy to lapse.

What Kitces didn’t mention is that if the loan balance ever does exceed the available cash value, paying some or all of the loan interest out of pocket generally solves the problem. And he didn’t tell you about the option of taking a policy “reduced paid-up,” as I discussed in our previous article on this topic.

So, we agree with Michael Kitces that a growing loan can cause a life insurance policy to lapse.

But Kitces mostly talks about “when the policy lapses.” Huh? “When”? That’s an odd assumption. It’s like saying, “Don’t take out a mortgage to buy a home, because when you default on your loan …”

Does he really think we are that irresponsible?

You don’t take out a life insurance policy loan with the idea that you will default on it—or just to see if it really works. You take out a loan because you have a need for capital.

And I’m going to prove to you why a life insurance policy loan makes more sense than any other form of financing. You can learn more about how to fire your banker and become your own source of financing when you download my FREE Special Report here.

Banking On Yourself Can Give You the Capital You Need When You Need It

If you’re talking about making a major purchase, whether it’s a dream vacation, remodeling a home, an equipment purchase for your business, or anything else, then you’re going to need capital. You also need capital when emergencies arise—medical expenses, a job loss, disability, and who-knows-what-else.

And we assume you are responsible. You don’t borrow from anyone—even yourself—if you don’t plan for the loan to be repaid!

In our previous posts on this subject, we talked about how a life insurance policy loan from a company preferred by Bank On Yourself Authorized Advisors gives you flexibility for when things get unexpectedly tough. Since we’ve already talked about that, we’re not going to deal with it again here.

But Here’s Michael Kitces’ Big Blind Spot …You Finance Everything You Buy!

Conventional wisdom says there are three ways you buy a big-ticket item (like a car, for example):

  1. You finance it
  2. You lease it
  3. You pay cash for it

Let’s look at each of these options:

Using traditional financing instead of banking on yourself

When it comes to purchasing a new car, traditional financing—taking out a loan from a bank, credit union, or loan company—is still the most popular method of acquiring the necessary capital.

When you take out a loan, you pay interest according to your credit rating and the economic climate, and you pay it back according to a pre-set schedule.

But after your loan is paid off, what do you have show for your money? Only an old car, worth whatever its trade-in value happens to be (which is never equivalent to the total of the payments you made).

Leasing instead of using a life insurance policy loan

The second-most popular method of financing is leasing. You pay for the use of a car owned by someone else. You don’t get the pink slip!

But what do you have to show when the lease is up? Even less than with traditional financing. You’ll turn the car in and have nothing at all to show for the payments you made.

Paying cash rather than using a life insurance loan

Perhaps you’re one of the few who don’t believe in borrowing. You save up money and pay cash for your car. Then you replenish your savings over a few years, so you can repeat the process. You would never borrow!

But … didn’t you actually borrow—from yourself?

Here’s the rub: If you save up for your car in a savings or money market account and then pull your money out to pay cash, how much interest are you now earning on that money? None, of course. And you’ll only begin earning interest again as you are able to put money back in your savings account.

The truth is, you finance everything you buy. Either you pay interest when you finance or lease, or you lose interest or investment income you could have had if you’d kept the money working for you instead.

Watch this entertaining video about “How to Bypass Banks and Finance Companies and Become Your Own Source of Financing”.

What Michael Kitces Missed in His Review of Bank On Yourself Policy Loans

Kitces missed the fact that someone who is going to make a purchase needs the money to do that—and he has to finance that purchase with money he borrows from somewhere—either from a bank, a leasing company, his own savings stash, or from some other source.

But in his review of Bank On Yourself, he seems to be saying “Don’t ever borrow money because you’ll get into trouble when you don’t pay it back!”

What Banks and Credit Card Companies Don’t Want You to Know!

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There’s a fourth way to pay for major purchases—and finance and credit card companies and banks really hope you never learn about this. This relatively unknown strategy lets you bypass traditional financing entirely—and bank on yourself.

When you save up your money in a Bank On Yourself plan, you can then borrow it to pay cash for a car or anything else you might want, and the money in your plan can continue growing as though you never touched a dime of it—if your policy is from one of the handful of companies that offer this feature.

So let’s compare the pros and cons of using a life insurance policy loan with every other common form of financing—keeping in mind the five fundamental requirements of the true meaning of Bank On Yourself, as opposed to the interpretation Michael Kitces gave to my trademarked term for the concept, as we discussed in our previous post.

If you make your major purchases the traditional way (financing, leasing, or directly paying cash), your money is gone forever, other than the potential asset value of something like your home or car. However, when you save up in a Bank On Yourself policy, your money is safe, liquid, tax-advantaged, and growing by a guaranteed and predictable amount every year. And it can continue growing, even while you’re using it to make purchases.

Let me repeat that: A dollar you spend is gone forever. But a dollar you save in your Bank On Yourself policy first, then use for major purchases, continues compounding and growing for as long as you have your policy. And that happens no matter how many times you use those dollars.

Saving money in a Bank On Yourself-type policy first—and then using it to make major purchases—allows your money to compound continuously even while you spend or invest it elsewhere.

KEY CONCEPT: Banking on yourself using life insurance policy loans solves the problem of having to continually interrupt the growth of your money when you spend or invest it.

What about dipping into your 401(k) plan to get your hands on capital when you need it?

I outlined some of the pitfalls of using your 401(k) plan for financing on pages 106 – 107 of my latest best-selling book, The Bank On Yourself Revolution:

With 401(k)s, IRAs, and similar plans, you typically have to sell the investment that you were counting on for growth if you want to get your money out. If it’s a bad time to sell, you’re out of luck. You have to bite the bullet and take a loss.

If you need access to your money in a 401(k), you may or may not be able to borrow money from it, depending on how the plan was set up. But even if your plan permits borrowing, there are government-imposed limits on how much you can borrow, how long you can borrow it for, and how often and in what amounts you must make loan payments.

If, during this loan period, you lose your job or leave your company for any reason (and you haven’t reached the magic age of 59½), in most cases you’re required to pay your loan back in full with interest in thirty to sixty days, or you’ll have to pay income taxes on the money you borrowed—plus a 10 percent penalty!

In addition, some plans don’t even allow workers to make any contributions while making payments on loans. Others require workers to wait a set time before contributing again after taking a withdrawal. If your employer matches contributions, you’d be taking a double hit.

Aside from the penalties and taxes you may owe by borrowing from your 401(k), one study reported in the New York Times calculated that a thirty-five-year-old with a $20,000 plan balance who takes out two loans in fifteen years ends up with about $38,000 less at age sixty-five than someone who never borrows, even if the loans are repaid without penalty.

If you want to learn even more about the Bank On Yourself concept, just download my free Special Report, 5 Simple Steps to Bypass Wall Street, Beat the Banks at Their Own Game and Take Control of Your Financial Future here.

How likely are you to default on a 401(k) loan?

Do you think you would never default on a 401(k) loan? I wouldn’t bank on that! In The Bank On Yourself Revolution I reveal the grim reality:

Dr. Brigitte Madrian, a Harvard University economist, estimates that 15 percent of 401(k) loan balances go into default, and at least 75 percent of workers who leave their jobs with a loan outstanding end up defaulting and getting stuck paying penalties and taxes.”

Don’t touch that IRA either!

Borrowing from your IRA, whether a traditional IRA or a Roth, is not permitted under IRS regulations. If you do borrow, the plan custodian will tell the Feds, and the value of your entire IRA will immediately become taxable.

Even using your IRA as collateral for a loan triggers taxes! For more on this, read “Retirement: Fantasy Versus Reality,” chapter 5 in The Bank On Yourself Revolution.

Borrowing on margin is living precariously

You may be wondering about borrowing money against your stock or investment equity. This is called borrowing on margin. And it is risky.

Perhaps the biggest risk you face is that if the value of your investments goes down, you may have to deposit additional funds into your account to “cover your margin.”

And you would be surprised at how many investors lose huge sums borrowing against their margin accounts, says the Motley Fool.

Ultimately, the broker needs to protect its loan, which means it will have no qualms about liquidating your position if you’re not in compliance.”

The Value of Life Insurance Policy Loans Has Long Been Recognized

Some mighty famous people have taken advantage of life insurance policy loans, when no banker would lend them a dime Which ones, you ask? If you look at page 53 of The Bank On Yourself Revolution:

Walt Disney borrowed from his life insurance policy in 1953 to help fund Disneyland when no banker would lend him the money.

McDonald’s might have served only a few hundred thousand burgers had it not been for Ray Kroc’s whole life insurance policies. Kroc had constant cash flow problems during the early years and used life insurance loans to help cover salaries of key employees and to create the initial Ronald McDonald advertising campaign.

In 2002, Doris Christopher sold her kitchen tool company, the Pampered Chef, to Warren Buffett for a reported $1.5 billion. She had started the company in her suburban Chicago home in 1980 with $3,000 she borrowed from her life insurance policy to purchase inventory.

Foster Farms was founded in 1939 when Max and Verda Foster used a $1,000 life insurance loan to buy an eighty-acre farm near Modesto, CA.

And many not-so-famous people use their policies this way, too. Suzi Hersey is a Virginia real estate investor. She says, “I was able to take a loan with no questions asked and no credit check. I’m the one who determines when and how I’ll pay the loan back. … I feel so fortunate to have found Bank On Yourself!”

See more success stories of people just like you who are banking on themselves with life insurance policy loans.

Why Bank On Yourself Policy Loans May Be the Eighth Wonder of the World

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As I describe on pages 107-108 of The Bank On Yourself Revolution:

Bank On Yourself gives you complete control over the equity (cash value) in your policy. You can borrow your equity whenever you want, for whatever you want, with no government restrictions. There are no penalties for early withdrawals, late withdrawals, or no withdrawals.

With Bank On Yourself–type plans, you have full access to 85 percent or more of the cash value of your policy beginning the very first month, without selling your assets to do it.

In fact—and this is one of the hardest things for people to grasp—if your policy is administered by one of the handful of companies that offer this feature, when you borrow money, your policy can continue growing, just as if you hadn’t touched a dime of it. …

With a Bank On Yourself–type policy, you can literally get your hands on the money you need from your account within days. You aren’t selling off assets. Your money is still growing like you never touched it. You aren’t running afoul of government regulations. And you aren’t subject to penalties.

Summarizing the Value of Banking on Yourself with Life Insurance Loans

A Bank On Yourself life insurance policy loan provides money you can get your hands on:

  • When you need it
  • For whatever you need
  • By simply telling the life insurance company to send you the money—no application or begging required!
  • With no penalties for accessing it and no restrictions
  • Without sustaining a loss

In addition, you get all these advantages:

  • Policy growth that historically has beaten savings and money market accounts and CDs
  • You aren’t required to liquidate or sell income-producing assets to get cash
  • You can use your money and have it continue growing as though you hadn’t touched it (if your policy is from one of the handful of companies that offer this feature)
  • The interest you pay is simple interest, not compound interest—and it ultimately benefits you, the policy owner

As we’ve seen, one of the key concepts that Michael Kitces missed in his review of Bank On Yourself is that you need capital to make purchases and to cover emergency expenses that inevitably arise. And I’ve just explained how banking on yourself with life insurance loans beats financing, leasing, or even directly paying cash. It also beats borrowing from your 401(k), borrowing on margin, and every other method of obtaining capital that I know of.

And when you borrow against a life insurance policy that meets the five key requirements of the Bank On Yourself concept, you are much more likely to avoid a situation where your policy lapses due to an unpaid policy loan.

Doesn’t it make sense to finance major purchases or get the capital you need in such a way that you receive the most favorable terms—with a Bank On Yourself life insurance policy loan?

If you’re ready to get started, request a FREE Analysis here, and you’ll get a referral to a Bank On Yourself Authorized Advisor who will make sure your policy has all the features necessary to maximize the power of the concept.

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Comments

  1. I fell into the trap of financing a car because I didn’t have the money to buy one. 2 years into the 5 year loan I needed to move and sell the car. It took me 4 months to get a reasonable offer and even then it was less than I still owed on the loan. I will never finance a car again and now I know there is a better way if I bank on myself.

  2. I took out a BOY loan to start a small business. It has been alot less stressful knowing I can pay it back on my terms and not a banker’s.

  3. Bob Cunningham says:

    There are several factors overlooked when being overly spooked about the idea of borrowing against your policy without paying it back. First off, you have to have built sufficient cash value before you can take a loan – you can’t just open a policy and immediately borrow $50,000. Secondly, BOYs have a more significant incentive to pay back the loan because, by design, you are paying yourself back rather than an outside institution. And yes, the assumption that people will get themselves in trouble by using this awesome financial tool is every bit as paranoid as suggesting folks should never obtain a mortgage for the same reason. What’s also silly, in my opinion, is how many of the financial gurus claim that buying term insurance, instead of whole life, and then investing the difference is more prudent when it is fairly obvious to most people that the vast majority who opt to attempt that strategy will end up spending the difference on non-assets rather than invest it for the future. The thinking is hypocritical. I will stay with my BOY policy and long-term strategy, thank you very much!

  4. angelo gauthier says:

    In canada we can withdraw the equivalent of a 401k to use as downpayment for a house-but the payback is very strict and you loose any advantage if you’re even a month late

  5. My wife and I each have a Bank on Yourself Life Insurance Policy and I really like how all the features and advantages of a Bank on Yourself Insurance Policy. Particularly, I was able to understand much better when a policy could potentially lapse. Know I’m more informed to make sure this doesn’t happen to us.

    We have the usual type of loans, especially student loans. I cannot wait to see the day my wife and I can pay off these student loans, they are a burden but this was the only way we could pay for education. We will be still paying for then next 12 years.

    We have had our policies for only a few years and we have been able to take loans to pay for part of our wedding, do some light remodeling work on our townhouse, down payment for our car. Our next loan will be to pay off one of my wife’s small student loan! We would rather make payments back to our policies that giving it away for someone else to make a profit of it.

  6. Dennis Strong says:

    I like the fact that I don’t have any banker or loan officer going over my finances and telling me if I can or can’t take out a loan. I don’t have to jump through hoops to get the loan. With no questions asked, I merely request my loan within the amount I have available and no one judges me for what I use the money. And there are no tax consequences. My credit rating isn’t affected because they don’t know what I owe. Only I do. And I determine how quickly to repay that loan.

  7. Anthony Bartens says:

    These policy loans are a blessing! I love the idea of “being my own banker” without having to go to a bank. I have made a few major purchases in my lifetime using my BOY policy and although I am mathematically “in debt,” I don’t lose sleep over it like how many people would the normal way.

  8. keven cooper says:

    Does the BOY system work for older people such as someone who has turned 80.

    • Pamela Yellen says:

      Neither age and/or poor health are necessarily obstacles. What matters is only that you CONTROL the policy and the equity in the policy, NOT that you are the insured.

      You could have anyone that you have an “insurable interest” in be the insured. Typically this could be a member of your immediate family, such as your spouse, a parent, a child or a grandchild, or a business partner.

      This is also something many older folks like to do for their children and/or grandchildren to help them build financial security, fund college educations, buy a house, etc.

      People of all ages can – and do – use this proven wealth-building method. And there are special Bank On Yourself programs available for folks who are age 60 and up.

      To learn more about those programs, check out these two videos and transcript

      If you are interested in this strategy and would like to find out if you qualify for it and how you could benefit from it, given your unique goals, circumstances and dreams, why not take advantage of a no-obligation Bank On Yourself Analysis that will help you get those answers? You can request it here.

  9. Norton Oliveira says:

    Awesome

  10. I’m so interested in getting one of my own Bank on Yourself plans, but haven’t yet. I live in Mn and have actually met with and talked on the phone several times with the advisor that I was told to see, but he rubbed me the wrong way every time I had to communicate with him. I’ve been waiting for another advisor to work in Mn so that I could meet with them and get a policy of my own started! Every time I get an email from Pamela Yellen and Bank on Yourself I regret not getting a policy 6 years ago when I first heard about Bank on Yourself and met with that advisor!!

  11. William (Bill) Williams says:

    Did I mention I take “cash flow” loans? Every three months I take out a fairly sizeable loan which I use to pay bills, travel, etc. I then use part of my income to make a pre-authorized withdrawal from one of my checking accounts to pay off the loan each month. And I repeat every three months. You might want to expand on this, Pamela.

  12. This is all made strong by utilizing the advantages of the BOY concept intelligently. Mr. Kitces does assume a large measure of irresponsibility on the the consumers part. Thanks for your clarification. Actually the agent i spoke with to start a policy didn’t make as clear as you have. I hope to start my own policy soon and also help advise my children in this revolution. Thanks Pamela.

  13. Christine Peace says:

    I am all about saving, saving saving! Because of this, I was able to help my parents pay off my siblings’ tuition without taking any loans out (which is another thing I’m all about: never paying a bank penalties or interest fees if I don’t have to). Also, my part-time job convinced me to start a 401(k) with them since the company matching plan sounded so good. I thought I was on the right plan with my finances and retirement. However, my funds were still just sitting in the savings with a next-to-nothing interest rate and I didn’t like that. When I heard about this Bank on Yourself plan, I thought it was too good to be true. I spoke with an authorized advisor and asked him a LOT of questions on how this could possibly work. After several conversations and reading the book myself, I was convinced. I moved my savings to a BOY policy and closed out my 401(k). (by the way, I didn’t know about the many fees that came with that retirement plan. I guess my company conveniently forgot to mention that part). I feel secure with my finances and retirement now that my policy is in force. I am planning a lot of traveling in the near future and I can’t wait to use my policy to do that!

  14. Jim Riedmann says:

    I’ve had my policy for six years and haven’t had any need to take out a loan, but after reading everyone else’s comments I’m thinking about using it to make some small investments that could help out in the future.

    I would be interested to learn if Mr. Kitces gets a chance to read these posts, and if so, whether they change his mind.

  15. Paul St.Pierre says:

    Paul St.Pierre
    Personal freedom is a product of economic emancipation. The more financial freedom one enjoys,the more personal freedom one experiences. Imagine,walking into an auto dealership,test driving a few late model cars of your choice and knowing that if you decide to make a purchase that very day,the negotiation with a sales rep won’t last but a few minutes. “How will you be financing this purchase?” You: “I won’t,I’ll be paying cash,you do take cash don’t you?” I’m sure you recall those Toyota commercials; “Oh what a feeling,Toyota.” Consider what “Banking on Yourself” can provide for you. “Oh what a feeling!”

  16. Sarah Sellars says:

    I heard about Bank on your Self on the radio. I thought this sounds good. I talked with one of the advisor on the phone told him I would love to take out a loan, but I don’t make much money to do this.He took my information got back with me.I took out a home equity loan by the way took forever to get finally it happened paid interest only for 3 years. Then my advisor said let’s pay off loan. So I did. Paying my self back now instead of some bank. Since then I’ve taken a second loan out to buy a car. It took about 3 day’s to get the money no questions asked. Except the people I bought car from wanted me to finance the car. Told them paying you cash. I’m so happy I heard about this on the radio. It’s been the best thing that could have happened to me.

  17. Chester Hull says:

    We’ve used our Bank on Yourself policies for buying RV’s, appliances, and more! We are getting ready to buy the 7th RV we’ve owned in 10 years, thanks to our Bank on Yourself plan! Knowing that my money is still working for me, even while using it for major expenses is great, and being able to negotiate deals without depending on financing from a bank is a huge advantage!

  18. I have two Bank on Yourself-type policies in which I have taken policy loans. It is true that it is the cheapest way to borrow money. The interest you pay on policy loans goes back to you (in a complicated kind of way), and beats any other financing method you would otherwise use. It beats traditional banks, finance companies, credit unions, and even family or friends if they charge you interest! Now if your family or friends don’t charge you interest, you might call it a wash, but then THEY lose the interest or investment income THEY could have had if THEY’D kept the money working for them instead. Same applies if you tried to save the money yourself and then pay cash for whatever you needed the money for. You’d lose the interest or investment income you could have had if you’d kept the money working for you instead. Pamela says you finance everything you buy. The question to ask yourself is why not finance it in the lowest way possible?

  19. Barry Dixon says:

    I have used the BOY loan process. I was able to borrow money and pay it back twice from my policy. My wife has her policy which has accrued interest over the last three years. We rolled over her IRA from her old job into the BYO policy. Taking control of our own financial circumstances has been a stress reliever. Thanks Pamela for sharing the amazing stories in both your books.

  20. John Kammerer says:

    This is truth about how money works, and articles that say it doesn’t work are written by people who simply don’t understand how properly structured permanent life policies work. I just wish I had known about it earlier – the information was out there, I just didn’t take the time to learn about it then! I’m glad I know now because it has improved my current cash flow & will definitely improve my future cash flow by utilizing this concept. This has truly changed how I look at money & will be even more beneficial for my kids & future grand-kids! The same can be true for anyone if they just take the time to study it…

  21. Patricia Walden says:

    Awesome idea!

  22. I bought a 20 year level life insurance policy with a $2,000 annual premium. After paying $40,000, the policy has expired, and I have no life insurance. I’m glad I am still alive and now own a BOY policy on my son’s life. In the course of my research, I learned that if I had acquired a BOY policy 20 years ago instead of the level term policy I would now have BOTH A SUBSTANTIAL CASH VALUE AND A DEATH BENEFIT.

  23. I purchased new windows for my house and financed them at an 8% loan and looked at borrowing against my life insurance policy to pay for them but decided against it and my cash flow at the time covered the windows and my other expenses but now I have had a decrease in my take home pay due to a downturn in my job. I am currently in a negative cash flow every month and am considering using the loan from my insurance company. Would this be recommended?

    • Pamela Yellen says:

      This may be a good option for you, but you should discuss it with your Bank On Yourself Authorized Advisor. If you need their contact information, please email us at [email protected] and include your full name and state, and our team will send it to you.

  24. We bought two new (to us) automobiles last year using policy loans totaling forty thousand dollars. All that is required is filling out a form and faxing it in. The paper check arrives in about a week. This ritual is just cumbersome enough that you really have to want the money virtually eliminating impulse spending. It is really nice to tell the dealership we are paying cash. My interest rate is 4.4% paid up front for a year. This is a motivation to get the loan paid off before triggering another year of interest. I created a payback schedule over five years at 20% interest to cover basic loan interest and principle plus opportunity cost. Our total payback will be sixty thousand dollars.

    We opened a checking account specifically to receive these payments. The payments themselves are an automatic transfer from our daily account into the holding account. All we must do is use a loan calculator to find a monthly payment, then plug that into the automatic transfer with the term of the loan, and never think about it again. The money moves each month by itself. When there is a sizeable total in the holding account I send a payment into the insurance policy.

    The holding account also acts as an emergency fund. The rule is anything that comes out of the holding account is a LOAN and must be paid back with interest (20% in my house). Property taxes are coming up in April. There will be a loan made from the holding account to cover that. At the end of each year there are property taxes plus 20%, so there should always be enough. After a while you can really see the velocity of your money at work. Car loan plus property taxes plus whatever else you have borrowed adds up quickly. Currently our loan burden is about twenty six hundred dollars moving each month into the holding account. This loan burden plus our normal saving routine allowed us to pay back the policy loan for the two vehicles in only six months — yet the loan is five years in length. When the policies are paid in full and the holding account is getting fat your options are to buy more policies or do as we are doing and sweep them into our vanguard or other investment funds. We need never touch the investment funds with the cash value waiting in the insurance policies. And if the stock market crashes we are sitting with cash value on the side lines waiting to go shopping for deals.

    The main thing to get straight is these policies are not an investment, they are an asset. My only regret is that I learned how to do this at fifty eight instead of twenty eight. We have a grandchild due in July. I will be buying a policy on that baby that will not only pay for the child’s first car, it will pay for the child’s retirement and leave a death benefit for his/her posterity.

  25. Don Charles Dixon says:

    I wish that I would have had this information in my younger years so that time could have worked for me in financial mattera

  26. Greg Pfister says:

    These three blogs reflect the general misunderstanding most people have regarding Dividend Paying Whole Life Insurance Policies. There is a lot to learn, but working with an authorized agent, doing your homework, you will come to find that a BOY type policy is a smart, longterm approach to capitalizing on your hard earned money over your lifetime. You have control, flexibility, very low risk, and an increasing cash value every year. And, no other investment will provide a death benefit that far exceeds what you may have been able to save/invest on your own. A win for you today, and for your family today and in the future.

    I have a specific plan to leverage my policy’s cash value for all of my large purchases, including some investments. Ironically, my first policy loan was actually not for me, but for my son. He decided to buy his first car without heading much of my advice. He really was taken to the cleaners. After a lot of back and forth with the dealer, we got a lot of the ‘extras’ removed from his loan, but the interest rate was 10%. Ridiculous. I took a policy loan to pay off his car, and he now pays my policy loan back. My policy loan rate this year is 3.93%. This is exactly the reason to be your own bank; you never know what life will throw at you. He is saving a ton of money on interest, and my policy is still earning exactly as it would have as if I had never taken a loan.

    Here is the beauty in how policy loans work. I could have paid off his car loan using cash in a personal savings account or even my brokerage account and have my son pay me back over 5 years. For those 5 years, I would not have the cash in my personal savings or brokerage account. That money is no longer working for me. Sure, my son would be paying me back every month, with some interest, but I’d be receiving a trickle of my money back each month over years. Instead of that approach, my BOY policy continues to leverage the power of compounding and grows every year as if I never took any money out. Every year while my son is working to pay the loan back, my policy continues to grow year over year. He and I both win leveraging my personal ‘Bank’.

    As Einstein has said, ““Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

  27. michael hericks says:

    I’ve always tried to pay cash for every major purchase. My BOY advisor helped me understand the fact that we finance everything we buy even when paying cash. Now I save my money for major purchase in my BOY plan. Then when I take out a policy loan from my own back my savings is still working for me!!!

  28. Philip Wahl says:

    Most traditional financial advisors preach diversification, but don’t seem to know they aren’t diversifying at all in their standard recommendations. They continue to suggest stocks, bonds and indexes but they all have the same underlying risks associated with the market. To diversify your financial picture, you must look beyond your investments to your entire financial landscape including how you save, invest, borrow, and spend money. A properly structured whole life insurance policy is an essential component to truly bring diversity and safety to your financial ecosystem.

  29. I have taken out two policy loans and the process was very quick and effortless. I received my funds quickly and make Payments each month to pay myself back with interest. I am happy with my whole life policy and received recommend it to everyone

  30. Ryan R. Lorenzen says:

    As Paul Harvey often stated on his radio broadcasts: “Self-government won’t work without self-discipline.” Finances are no different. BOY is NOT a “get rich quick with no effort” set up. You need financial self-discipline to know that loans you take from your policy you need to be paid. Period. The beautiful part about BOY, however, is YOU have a say on the schedule to repay those loans. The empowerment that provides you is truly beyond description….at least beyond the description you will ever get from any financial/banking advisor. Making our own payment schedule has made sleeping much easier at night for my wife and myself!

  31. Rich Sandman says:

    I’m looking forward to sharing this concept with my kids as they graduate and start their careers. I sure wish I had known about this when I was starting out! That being said, I am grateful that I started this and I’m now building toward true financial freedom!

  32. Jane Stubbs says:

    My husband and I used our first loan to put in our HVAC system. It was so easy to get the loan, and the knowledge that we were helping our finances instead of the banking system’s made it so much nicer. You should have seen the look on the guy’s face when he was trying to explain his company’s financing programs, and I kept saying, “No thank you; we will be paying in full with a check.” After the third try, he finally heard what I said, and he stopped mid-sentence and asked, “The whole $9,000 and whatever it was?” I said yes, and he took another minute to let that sink in–like he didn’t want to break the spell. We wrote up the paperwork and scheduled the installation.
    If it wasn’t for our decision to set up the BOY policy, we never could have done that. It felt amazing to just be able to make the decision to replace the unit before it completely died, and then pay for it on our terms!

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