In financial circles, the term infinite banking is tossed around quite a bit. However, it’s not surprising that many people aren’t aware of what this concept is. That’s why, when people ask, “What is Infinite Banking?”, it’s important to answer this question as comprehensively as possible.
Unfortunately, the explanations to this question have been somewhat confusing in the past. Fortunately, there are ways in which this concept can be explained and understood so that the full effect of what infinite banking actually is, and how it can benefit an individual, is completely understood.
It Doesn’t Happen Overnight
The first thing that needs to be understood is that infinite banking as a financial process is something that takes time to cultivate. A person has to be disciplined to follow specific standards. They also have to have the financial resources to allow for this unique type of lending transaction.
Access to High Cash Value Life Insurance
Infinite banking starts with high cash value life insurance policies, especially over funded life insurance policies. What this does is unlocks the potential for a person to borrow against their life insurance policy.
Where the disciplined factor comes in is that a person will need to commit themselves to repaying back the money that was borrowed, even if repayment isn’t necessary. In addition, the repayment of these funds needs to include interest fees just like a bank would charge an individual.
What this does is it helps improve a person’s bottom line. For example, life insurance policies can often act as investment annuities that earn interest. With a person repaying back money they borrowed against this policy with interest, this improves the interest accumulation that a life insurance/retirement annuity accrues.
The Benefits of Over Payment
Paying back borrowed money with interest also increases the amount of money a person can borrow against a life insurance policy in the future. This means that if a person needs more finances for a larger purchase, or for a different type of investment, having more available funds to borrow against makes the borrowing process much easier.
Infinite banking isn’t the same for everyone. Different circumstances require different approaches. However, by understanding the premise behind this process, and understanding how it can help your finances going forward, this makes infinite banking an interesting and intriguing proposition.