Infinite Banking – Overview, How It Works, Advantages and Disadvantages

Infinite Banking

What is the infinite banking concept?

The infinite banking concept is not new in the industry, where you are using your assets in the long run as the bank. Although it may sound pretty simple in words as a clear and easy-to-do infinite banking concept, it is much complicated than it sounds.

What is infinite banking?

Infinite banking is a process that involves an individual who in all becomes his or her banker. This particular infinite banking concept was created by Nelson Nash, where nelson has talked about this concept in his book “Becoming Your Own Banker,” and using the whole life insurance policies that even pay out dividends to the individual.

Thus, in the case of the infinite banking system, you become your own banker as you pay cash value in this policy, which you can, later on, borrow too when needed as creditors. So, you or an individual can borrow money from this cash value accumulated for unanticipated or substantial expenses other than the normal day-to-day expenses.

Infinite banking concept scam

Many people in the market see the infinite banking concept as a scam. Well, this does not hold true. As, infinite banking offers an individual with slow growth, which is implemented for a long period of time. You cannot see the results within a short span of time to a get-rich option for yourself and your investments to grow up.

 Although there are many investments options available out in the market such as real estate, stocks, bonds, etc which are preferred by individuals to invest their money in. These investment options also are risker compared to infinite banking. So, we see infinite banking as with less risk and also no loss provisions involved.

Though, the money kept is in liquid form and can be used when in need or to make any smart financial investment.

Also Read- Solow Growth Model – Overview, Assumptions, and How to Solve

Infinite banking example:

In case an individual G has borrowed $ 25,000 from your policy to finance his new home, where he needs to decide on the repayment plan of the same. Therefore, he decides to pay off himself back over five years, at a 5 % interest rate. So, now the repayment of G will be $ 472 a month with a 5 % interest rate.

Pros and cons of infinite banking

Here we will now be discussing the infinite banking concept pros and cons.

  • Advantages of Infinite Banking

Some of the Advantages of Infinite Banking are:

  • Fixed Premiums
  • Growth of Cash Value
  • Tax-Free Loans
  • Guarantees

1. Fixed Premiums

There are Fixed Premiums that you pay in infinite banking which are permanent life insurance. So, there is no role of age in this concept where if you choose your infinite banking policy at the age of 20 or at the age of 59 the amount of premium you will be paying will remain the same.

2. Growth of Cash Value

The cash that you have invested will continue to grow further as you are not taking the money out from the insurance policy. This growth of money will continue even if you are paying for the borrowed loan, which in this case is also increasing your share of profits and your cash value.

3. Tax-Free Loans

The loans are taken in case of are not treated as regular income, which clears the concept of tax to be paid on the loan amount.

4. Guarantees

Some incredible guarantees are provided by the infinite banking as Whole life insurance is:

You will for sure get cash value accumulation

You will for sure get the death benefit

You will for sure get fixed premiums

You will for sure get compounding interest rate growth

  • Disadvantages of Infinite Banking

Some of the disadvantages of Infinite Banking are:

  • High Costs
  • Must qualify
  • Limited Investigations

1. High Costs

The infinite banking concept takes a long period of time in order to pay a small portion of the monthly payments. So, it is not a better option to consider as it sometimes involves a high or overpaying premium.

2. Must qualify

There are certain parameters that are needed to be qualified to opt for infinite banking, as the case may be with any other life insurance policy as well. Further, the Qualifications are based on your age and fitness.

3. Limited Investigations

There are Limited Investigations needed in case opting for infinite banking, which could even prove to be beneficial for unrelated commodities. Further, this approach is only viable in long run only.

Also Read- Operating Cash Flow – Definition, Formula, and Examples

Best Infinite Banking Companies

Some of the Best Infinite Banking Companies, who even has infinite banking agents and even payout dividend while providing with whole life insurance are as:

  1. American United Life
  2. Ameritas
  3. Foresters Financial
  4. Guardian Life
  5. Lafayette Life
  6. MassMutual
  7. New York Life
  8. Northwestern Mutual
  9. Ohio National
  10. Penn Mutual

How to become your own bank?

You can become your own bank just by:

  • Getting yourself some whole life insurance.
  • Plan Requirements of your own
  • Use your cash value
  • Payback your loans on your own terms

Infinite banking calculator:

You can choose an infinite banking calculator and know your estimated repayment plan while you take a loan, with the interest rate involved.

Conclusion:

The infinite banking strategy is for the ones who can deliver time efforts as well as patience with time in it. As an individual will be contributing the amount to the whole life insurance and also to 401k thus, an individual should also hold some money for this purpose. So, while taking infinite banking review you can decide the price as well as plans and rates of the policy which can match your budget to gain the benefit of the same.

Frequently Asked Questions:

  • Is infinite banking a scam?

Many people in the market see the infinite banking concept as a scam. Well, this does not hold true. As, infinite banking offers an individual with slow growth, which is implemented for a long period of time. You cannot see the results within a short span of time to a get rich option for yourself and your investments to grow up.

  • How to become your own bank?

You can become your own bank just by:

  • Getting yourself some whole life insurance.
  • Plan Requirements of your own
  • Use your cash value
  • Payback your loans on your own terms
  • Can I be my own bank?

Yes, you can be your own bank whereas you pay the cash value of the policy, which you can, later on, borrow too when needed as creditors.

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