Blog 106 – The Ins And Outs Of Policy Loans 

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Where does the loan money come from? When you take a policy loan, the money does not come from the cash value of your Infinite Banking Concept (IBC) policy, but from the general account of the insurance company, and your cash value remains in your policy earning interest and dividends. The amount of your loan is collateralized by the same amount of cash value in your policy and as you pay down your loan, the exact same amount of cash value is released from collateralization, and it is again available for another policy loan.

How much money do you have available for a policy loan? Depending on the insurance company, between 95% and 98% of your cash value is available for a policy loan.

How fast after you make the initial premium payment can you take a policy loan? As soon as you can show the insurance company a bank statement – yes, a bank statement, not a computer printout – that the premium payment has cleared your bank.

What about loan interest payments? The insurance company charges you a loan interest from the day you take out the loan until your policy anniversary date, which is the day of the year when your policy was issued.

What is the danger of taking the maximum amount of available loan? Since the loan interest needs to be paid no later than on your anniversary date, you may not have enough cash value in your policy at that time to pay for it, in which case, you will have to find another source of cash to pay the loan interest. We recommend that you think about it, before taking the maximum amount of loan available. 

When should you take a policy loan and when should you pay cash? You should take a policy loan if the expenditure you have in mind is a lifestyle “necessity”, a reduction of debt, or an investment. Lifestyle necessities can be repairs, maintenance, and replacement costs of facilities and infrastructures that serve to increase your future production and/or future revenue. Debt reductions serve to increase your net worth. Investments appreciate and then can be sold for a profit. All three of those types of expenditures contribute to building your estate in the long run and are appropriate expenditures for taking a policy loan. On the other hand, living expenses such as food, gasoline, utilities, and similar consumption costs are completely different types of expenditures that should be paid for with cash, not policy loans. You don’t want to use your IBC policy like an ATM machine every month.

What is the best way to increase the amount of available loan? The best way to increase the amount of available loan is to increase the cash value of your IBC policy and the most effective way to increase the cash value of your IBC policy is by making as large as possible contributions to your paid-up additions rider within the Modified Endowment Contract (MEC) limitations.

Should you take withdrawals or policy loans when you are supplementing your retirement income from your IBC policy? The most financially efficient way – to avoid paying income taxes – is to start by taking withdrawals from your IBC policy down to you cost basis (the total premiums you have paid to your policy) and then switch to policy loans.

Do you have other policy loans questions that we have not covered here? If you do, please contact us at We answer all your questions accurately and within 24 hours!

If you would like to learn how you can grow a substantial amount of cash that you have access to at any time without penalties, is unrelated to the stock market, and will generate income that is not included in your tax return, visit our website at  or feel free to email us your questions at or call us toll-free at 1-844-443-8422.

Isis B. Palicio, LUTCF, MBA
Pedro A. Palicio, MBA, Ph.D.
Infinite Banking Concepts® Authorized Practitioners

We are experts in designing high cash value dividend-paying whole life policies.

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