How do interest payments work on a whole life policy loan?

31 Mar 2026 · 2 min

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1:47

In this YouTube excerpt, Jayson Lowe explains the mechanics of interest payments on loans taken against the cash value of a whole‑life insurance policy. He clarifies that the simple interest that accrues on the outstanding loan balance is paid directly back to the life‑insurance company, effectively becoming a contribution to the insurer’s earnings, which policyholders co‑own. Any “extra” interest that a borrower wishes to use for premium purchases is not truly extra interest; it is treated as premium and must be applied to a policy that still has capacity for paid‑up additions. Because a single policy cannot indefinitely absorb all financing needs, Lowe advises viewers to think of their insurance holdings as a growing system of multiple policies. As the system expands, excess capital can be allocated to other policies with available space, allowing the borrower to continue financing needs through premium purchases. He distinguishes between merely “embracing” the concept—paying premium and building cash value in one policy—and actually “implementing” a multi‑policy system, emphasizing that implementation is necessary for larger financing demands.

Chapters

"When we are repaying a loan made from cash value from my own policy, will the system accept my interest payments if my principal has been paid off? Or do I use that interest payment different since I'm buying premium with it?" If we're referring to additional interest, if you're only paying the simple interest that accrued on the loan balance, then there's only one place for that to go, and that's directly back to the life insurance company, and that's a net contribution to the earnings of the insurance company, which you co-own. But the extra interest you can use by paying premium, and it's not really extra interest, it's more premium. And whether it's whatever system will hold it, so whatever policy will hold it. So we have 77 policies in our system. If we requested a policy loan from policy number 1, and by the time we finish our own loan schedule, there's no room inside of policy 1, meaning all the premiums are paid, there's no loan balance. Than any other policy in our system that has room where we can purchase paid-up additions, where we can pay base premium. That's where the extra capital's gonna go. So I would encourage everybody when you're thinking about this, that you think past an individual policy, whether it's on your life or someone that you have a beneficial interest in. This will grow into a system of policies over time. If you're embracing the concept and you're implementing it in that exact order, embracing it and implementing it, one policy's not gonna be able to hold it. You're gonna get to a point where your system must expand in order to accommodate your financing needs. That's inevitable if you embrace and implement. Some people embrace, but they don't implement. They just pay premium and they build up cash value. Nothing wrong with that. It's not good, bad, or otherwise, but that's what some people just choose to do. They just choose to have their capital reside there. There is no way that one policy will hold it all.