Policy Loans Explained: How Borrowing Against Cash Value Actually Works

Why would I pay interest to borrow my own money? Because the assumption initially is that a person is borrowing their own money, which isn't the case. We know that they're accessing the life insurance company's money. Consumers who borrow can become obsessed with interest rates and completely ignore the value of the control that they gain. The cheapest loan on paper can become the most expensive loan in your life.

The cavalry has arrived.

Welcome back to another CommandPost. Ash and I were just having this really good discussion around the value of control, something that I had mentioned that had come up for me because people who are researching the Infinite Banking Concept and they develop an understanding of the process. And the question inevitably comes up, understandably so, it makes perfect sense why it would come up. Why would I pay interest? Because the assumption initially is that a person is borrowing their own money. It's like, why would I pay interest to borrow my own money? And which isn't the case. We know that They're accessing the life insurance company's money. It's much like when you own a house, right? If you went to the bank and the bank said, yeah, we're going to qualify you for a line of credit. Your home's worth a million bucks. We've qualified you for $600,000 in a line of credit. They're not handing you bricks or drywall or kitchen cabinets. The house stays intact. The house is the collateral for the loan. And But the— what came up for me in thinking more about it was the value of the control that you gain. That can easily be ignored, right? Because when you hear the word control, people understand what that means. But what is the value of it? What is the value of the control? Like, if you think of, um, what it's worth, right? How much is it worth to finance a major purchase that you need without a credit check, without loan approval, without income verification, without a banker deciding whether or not you're worthy to access the financing to get that thing purchased? And my journey with this process, and you just outlined an example of how you financed a pretty big plot of land for you and for your family, and you were doing that from a position of total and absolute control. And my journey with this concept over going into my 19th year, that's what I'm optimizing for. is control. The interest rate to borrow money, that's visible. The value of the control is not visible until the day you need it. Isn't that good?

That's great, Jason. And you're absolutely correct. And people really need to ask themselves, what is that level of control worth to them?

Right.

Right.

Because people don't appreciate liquidity and flexibility until their financial circumstances change.

That's right. Yeah. And whenever, if you've ever, and lots of our listeners or people that are watching this right now, they can appreciate this because a lot of them have gone through it. And even people that we work with on a regular basis, Like, if you've ever gone to a financial institution and requested to borrow money.

Right.

So, whenever you've gone hat in hand and just hoped that they would be willing to lend you money so that you could purchase said thing. And you think about that, like you've got to come in and you've got your big stack of paperwork to justify why Why you're qualified or why you deserve to have some of that money given to you, right? Anytime you've ever experienced that or even the denial of funds, whenever you've experienced that, just ask yourself, how did that make you feel? Was that something that you appreciated? Was that something that you would want to go through more than once? Because if it's not, and you've gone through that experience and you remember what that feels like for not being in control, then you really might want to start thinking about how do you put yourself in a position where you have the control to be able to access and have liquidity, because nobody wants to feel the way they felt in the past.

Yeah, it's very accurate. It, you know, people— I was sharing this yesterday with a gentleman that I was speaking with, and, you know, he grasped it right away because we talked about a person's need for finance, right, throughout their lifetime. If you are to— if you just put some thought behind what your need for finances throughout the course of your lifetime, And banks have, understandably so, they have a process of underwriting so that you, like you mentioned, you apply for the financing. There's a credit check, income verification. And it's not just a one-sided reason for doing that. The banks, there are regulations in place to prevent banks from predatory lending. Where money's being lent to people who have no business borrowing it. And so, it doesn't take away from the necessity for underwriting. When you are a participating policy owner, so you've got your dividend-paying whole life insurance contract, which immediately begins accumulating cash value, which is not money, as you and I know. And the life insurance company itself is guaranteeing that collateral. That's why you can access a policy loan from a life insurance company and there is no repayment schedule. There's no income verification or credit check or elements of underwriting that you would experience if you were not borrowing the money from a life insurance company. Very important distinction to understand. And right in the middle of that is one of two things: peace of mind or irritation, tension, friction. And people experience the irritability and the tension and the friction more than once throughout the course of their lifetime. When you think of all the things that you are going to finance. And so, what downside is there to having the highest level of control?

Right?

It doesn't mean that rates don't matter. Of course, rates matter. It means to me that the rate is only one variable in a financing decision. You've got control, liquidity, certainty, flexibility, ready access to capital on demand on your terms. All of that has value as well. If you ignore that, then you're only processing part of the equation.

Yeah. And that's where, you know, We spend so much time looking at everything holistically when we're working with people so that we can do it correctly and we can really explain to them so that they understand the processes that we're going through and the conversations that we're having because they need to be clear on that. They need to have that clarity in order to make those important financial decisions. And I think, like you mentioned, all those factors that you should be looking at and taking into consideration holistically, We've been conditioned to just focus on the rate. We've been conditioned to focus and look at just one piece of the entire thing, the entire equation. And when we only do that, we're not looking at everything else and how it may either work or not work in our favor. So, when we talk about planning, like, you really need to get into the weeds to figure out, does this make sense? And is this going to benefit you? Long term, right? Yeah. Because we're like most people, a lot of times we're only looking at it. We're only looking at our need now. We're not looking at our need later. We're not. We're only looking at how this is going to benefit us now, not how it's going to benefit us or not benefit us later. We need to take that into consideration. If you're planning, if you're actually doing things right and you want to do things smart, that's what you should be looking at.

Yeah, I agree with you. If we were to address, let's say, 98+% of the North American, United States and Canada, car-buying public, so they go and buy A number of these things throughout the course of their lifetime, and they're paying cash for them, they're leasing them, they're financing them. It all— every single one of those methods involves a permanent transfer of money away from you. And what people want is they want the car. They want all the convenience associated with the car. They want the mobility. They want to be able to select, finance, get in, turn the key— you don't turn the key anymore. I'm just aging Ash and I here. And just drive away. And if you develop an understanding of the Infinite Banking Concept and the policy loan process with a life insurance company and you understand that your capital, your system continues growing in value every single day that you're driving a depreciating asset, you'll never look at financing the same way again. You can't unsee it. Hey, we're going to buy a vehicle. Okay, how much are we going to spend? $50,000. How much cash value do we have? $75,000. Can somebody please get in touch with the life insurance company and request a policy loan? Absolutely. Life insurance company says, you've got more than enough collateral. How would you like to receive the $50,000? Directly deposited into your account, or would you prefer that we mail you a check? Well, what about repayment? That's up to you. You're the policy owner. All that we do is administer the insurance contract. You own it. So you have the gold, you make the rules. The policy owner goes, wait a second, hold on, back me up here. You're going to directly deposit $50,000 into my Checking account, and you're telling me that I control the repayment schedule of that policy loan and that my total cash value, $75,000, is going to continue rising daily while I'm driving the car? Yes, sir, that's exactly what we're telling you. Oh, and by the way, God forbid something happens to you Your family is still going to own the vehicle, and there's going to be a tax-free windfall called death benefit that's going to be paid to your named beneficiaries income tax-free. What? Again, can you run that past me one more time? It's the value of the control that you gain. It's unmatched. It's just unmatched. And that was the brilliance of what Nelson described in his book, Becoming Your Own Banker, this 92-page read that if it's not part of your wealth-building library, you have an opportunity. Get your hands on a copy of this book. When I was introduced to this in July of 2008, it not only opened my eyes to a whole new financial world, it changed the way that I think. About how money gets handled within our family. We've never looked at financing the same way again, ever. Isn't that good?

It's great, Jason. And I— that what? That's usually the generic response as to what just happened when you explain that to somebody. It's like, whoa, how can that make sense? Right? And bringing it back to the conversation of control, right? So, in that scenario, you're controlling the ability to access the capital and you're also controlling the way that you're going to purchase the vehicle.

Yeah, good point. Expand on that.

Well, you can make the decision and everyone has the same decisions to make. You're either going to finance the vehicle traditionally, you're going to pay cash, or you're going to lease. But either way, that's a financing decision one way or the other. So, you can leverage the asset that you already have in place from your example, or you can constantly start and stop and restart the process of saving and spending and always starting back from zero and never allowing anything Asset-wise to accumulate or to benefit you long-term.

Yeah, while I would say in addition to that, again, just being going into my 19th year in implementation of this process in our family, I could if you paid and said, "Look, I'm going to pay you a million bucks to tell me the last time." You compared 3% financing versus 6% financing. I wouldn't be able to give you an intelligent answer to that. I don't compare that anymore. What I compare is the financing experience, not the rate. It's the experience. And we've discussed, right, the traditional method, the approval process, conditions, the absence of flexibility, the absence of speed, certainty, all those things. My financing experience compared to someone who's not implementing the Infinite Banking Concept is radically different. My financing experience is peaceful and stress-free. I just happen to value that. Policy loans do not have a repayment schedule. That can be dangerous if someone's irresponsible.

Mm-hmm.

If you are responsible financially, being in a position of total and absolute control has its advantages. But the person who has no experience with the Infinite Banking Concept is naturally inclined to compare rates. There's nothing wrong with comparing rates. It's not about that being right or wrong. I value the experience and the control that accompanies it when you become the banker as it relates to your needs. And it's ridiculously simple. You pay premium in exchange for contractually guaranteed access to capital among death benefit, all these other attributes and advantages. And then you get to create a peaceful, stress-free financing experience for you and your family for the rest of your lives. It's brilliant. It's absolutely brilliant. And so, rather than compare percentages, compare the system and then ask yourself, which system do I see myself most aligned with? I haven't met anybody, Ash, who sat down with me and said, well, actually, you know, I prefer the tension and irritability and the frustration associated with conventional financing. I actually quite enjoy that. Being in a position of total and absolute control is of no interest to me. Like, I've never had occasion to speak to people about that. And when people are researching, you've got financial professionals who take all the financing experience out of the equation and compare products. Let's compare dividend-paying whole life to a 401. A Roth IRA, tax-free savings account, mutual fund, stock market, Bitcoin, crypto, NFTs, whatever it is, real estate. But they completely gloss over the financing experience and the value of the control that you gain through that. Whereas in my family, when we need access to financing, it's a phone call. No stress, no pressure. And the insurance company goes, yeah, money's on the way. Nice doing business with you. Like, the cheapest loan on paper can become the most expensive loan in your life.

Mm-hmm.

Missed opportunity, delayed approval, poor timing. Yeah, but the interest rate was low. Yeah, but the total cost wasn't. When we send money back to the life insurance company in the form of policy loan repayment and we're replenishing the life insurance company's general account, participating account, Depending upon what side of the border you're on, and you get to reaccess everything that you repaid plus more. What is the value of that to you? There's a distinction there. Would you agree?

Oh, yeah. That's like the definition of flexibility right there.

My God.

I just want to go back to When you mentioned systems, Jason, because it's such a great point, you know, ask yourself, which of these systems do you want to be a part of?

Hmm. Yeah.

Okay.

Yeah, that's, that's a question to— yeah, that'll bake your noodle.

Because, you know, you— when, when— because people are going to compare, right? There's going to be a comparison of this versus that. Well, we're not saying don't compare. We're just saying, make sure that you're comparing things that are in the same class or that are of equal nature. But when you bring up systems, like, we know the system that's currently in place. If there was a system that benefited us more, that gave us more control, why wouldn't you want to look into that? And why wouldn't you want to be a part of that? Because you really have to ask yourself, What is the cost worth of being in control? And when you talk the value of control, it really comes down to the individual based on how many financial experiences they've had throughout the course of their lifetime. But what price can you put on having a stress-free way of life?

Yeah. There is no price tag. And what Ash and I are saying, we're saying, look, we're not suggesting that people ignore interest rates. What we're saying is don't ignore everything else. Because what is What is immediate access to capital on demand, on your terms, worth the day that your perfect investment opportunity appears? What is that worth?

Because opportunities will track you down if you have capital.

And people— We've shared this earlier that your need for finance throughout your life is extensive and financing something appears in your life every few years. You've got cars, you've got business equipment, renovations, real estate, taxes, education. So, it's not, will you ever finance things? Who controls the financing function? Because I personally place a high degree of value on the control that I've gained by beginning to implement this process back in July of 2008. We have 78 policies in our family banking system now. $1.57 million in premium this year and every year. Our family, when they need vehicles, when they need renovations, kitchen appliances, all those things, right, that we— that's all par for the course as you progress through life. And all of that money that would've been transferred away from the family permanently. Is now making its way back. Isn't that good? And what is certain? What is access and certainty worth during a recession, during a financial crisis? What is that worth? Peace, no stress. My goodness, what an incredible, incredible position to be in. Total and absolute control.

I still come across people that from either personally or from a business position where they're still feeling the effects or they're still trying to climb their way out of what happened during COVID When things were shut down and, you know, revenues vanished or businesses had to close up, whether temporarily or permanently. And people are still trying to recover from that.

Right.

And that wasn't something that was necessarily, you know, their fault. It was just a lot of stuff that was imposed, but that they still had to go through. And depending on how they were structured financially or, you know, what their position was, It either worked out for them or it didn't work out for them. Yeah. And something like that doesn't happen overnight.

Yeah, very good point. It's not an overnight deal. And if I reflect back, Ash, on my sequence of steps, I was introduced to the concept, the infinite banking concept. I determined what premium was comfortable and affordable to get started, and that premium is paying for dividend-paying whole life insurance. We began our program with one policy, and that gradually and incrementally expanded into a system of policies, precisely what Nelson suggested as the optimal way to implement the process. We periodically accessed policy loans from the life insurance company. That's money on demand on our terms. We didn't reduce the asset's value. We didn't trigger any taxable event. And we were able to control how we financed the things that we need. And still do to this day. And it's just peaceful and stress-free, and we're diversified in lives insured. And we know that every now and then, and the life insurance company knows the same, People die. And when that happens, the death benefit proceeds are paid income tax-free. You get to replenish the family, and you get to continue implementing the process uninterrupted. And it's the infinite banking concept is not about avoiding interest. It's about improving financial experience, the financing experience. That is a completely different objective, and you're improving it by taking control of it. And that, boy, I'll tell you, the time— you and I can agree, we were kind of joking around about this earlier— like, the time goes by fast. And what we experience in the marketplace, which is why we record this clarifying content, because we were introduced to people all the time who are evaluating product, they're evaluating policies. My late mentor who pioneered, who engineered this concept, he taught us to evaluate the banking process. And who's controlling it? That is a very, very profound shift in thinking. Do you agree?

Definitely. Most people, they're not being taught this. It's not being taught. It's not being talked about out there, especially with all the noise that's going on where people are being fed all kinds of magical solutions. And there's a reason why you mentioned several times that Nelson says that you don't need to sensationalize this process. Not at all. It speaks for itself. If you understand the problem that infinite banking is trying to solve, then everything will make sense. Everything will fall in line. You will know exactly what to do because the time is going to pass anyways.

Precisely correct. And what's the phrase that you've trademarked around control?

I don't know if it's— I don't think it's a trademark, but it's one of two things. You're either in control or you're being controlled. There are no other options. That is it. And you have the opportunity to decide which of those two you want to be doing.

So maybe today's command post wasn't really about policy loans. Maybe, yeah, maybe it was about something a lot bigger than that. Like the real lesson is that Consumers who borrow can become obsessed with interest rates and completely ignore the value of the control that they gain through the implementation of the Infinite Banking Concept. And so think about your own financial life. Just take a moment and really think About your own financial life? How many decisions have you made based solely on a percentage, an interest rate? How many times did you actually stop to ask, who's controlling this financing function as it relates to my needs? What value would I place on the control that I would gain by becoming the banker as it relates to my needs? What does that Certainty worth? What is the flexibility worth? People who are familiar with this process and who are implementing it, they don't ignore interest rates. They just refuse to let the rate become the entire conversation.

That's right.

And they understand that financing is about far more than a percentage interest rate. It's about the experience, the experience in as it relates to control and certainty and ready access. Build a financial system that serves your family instead of forcing your family to serve the financial system. This book, I cannot overemphasize. I, I've— if I've said it I've said it probably 20,000 times over the years. Add this book to your wealth-building library. If it has even a fraction of the impact on you that it's had on me, Ash, 6,500+ clients in the United States and Canada, if today's conversation that Ash and I had, if it's If it's even remotely challenged the way that you've always thought about financing, please do us a favor, subscribe to the channel, leave a comment. Ash and I love comments. We love the engagement because every single week, this is what we do. We're just speaking to some of the biggest elements and then kind of pulling it apart, putting it back together until it makes good financial sense. So, we'd love to hear from you.

I've got something to add, Jason.

Yeah, yeah, please do.

So, just as when you mentioned the book, Becoming Your Own Banker by R. Nelson Nash, if you're going to add it to your wealth-building library, I've got a series of books right over here to the behind my head that are stacked horizontally. So, if you think about that foundation that you're trying to create, You place this book down right here as the foundation and then start stacking all the rest of your wealth-building library on top of it. And I promise you that you will be further ahead financially than you would have if you never did it.

I agree. And, you know, you can gradually and incrementally drive toward a bigger future. I don't know what our editors are going to be able to do with that, but just kind of throw that in there. It reminds me of, you know, the movie Strange Brew when they raised the van up on the lift and it was— they were trying to make it like the van was flying. Anyway, if you don't know that movie, you should. You have an opportunity. It's a hilarious movie. But as always, you know, thanks for spending time with us and Yeah, we'll definitely see you on the next Command Post. And if you're serious about understanding the infinite banking concept the right way, get your hands on a copy of the book, Becoming Your Own Banker. You can ease on over to learnwithjay.com, learnwithjay.com. And there's just a free in-depth training. It just walks you through the principles, the process, the mechanics of the concept in much greater detail. And so, thanks again for spending time with us, and we'll see you again real soon. Ash, this was fun. Money flows. Once you begin to observe the pattern of flow, you start seeing something that most people miss. Money is always being stored somewhere and borrowed from somewhere. You've got car payments, credit card payments, loan payments. You're paying cash for things.