How Infinite Banking Actually Works (An Example Case Study)
Let’s dive into this whole Infinite Banking Concept (IBC) in real, practical terms. Let’s face it, at first glance, it sounds a little unconventional. Borrowing money from yourself? Growing your savings while you’re spending it? If you’re like me, your first reaction might be, “There’s no way this works in real life.”
But it does. And I want to show you how. Let’s walk through an example that feels realistic, something you or someone you know might actually do.
Meet Jeremy: A Dad with a Vision
Jeremy is a family man. He’s got two kids, a home, and a long list of financial priorities. Right now, he’s focused on two big goals: upgrading their old, unreliable family car and building long-term wealth.
Instead of heading to the bank for a car loan, Jeremy decides to tap into his Infinite Banking system. A few years ago, he started funding a specially designed whole life insurance policy (the kind specifically tailored for this purpose). After paying about $60,000 in premiums over the years, Jeremy has built up $40,000 in cash value—money he can borrow against whenever he needs it.
Buying the Car with Infinite Banking
Jeremy finds a reliable SUV for $30,000. But instead of signing on for a car loan through the dealership, he borrows $30,000 from his policy’s cash value.
Here’s why this is a smart move for him:
No Bank, No Hassle: There’s no loan application, no credit check, and no hoops to jump through. Jeremy is essentially lending money to himself.
His Money Keeps Growing: Even though Jeremy borrows $30,000, the full $60,000 he’s paid into the policy continues to grow as if he never touched it. That’s the magic of uninterrupted compound interest.
Paying Himself Back
Jeremy treats this just like a bank loan, setting up a repayment plan. The key difference? This time, he’s paying the interest back to himself—and his “business partner,” the insurance company, not a bank. His “partner” is a company with a 150-year track record of consistent profitability, so they’re a safe bet.
Let’s say Jeremy sets an 8% interest rate over five years. He’s okay with paying slightly more than typical interest rates because of the unique benefits he gains.
Here’s how it works: Insurance companies typically charge policy loan interest rates around 4.75% to 5.3%. In this example, let’s assume a 5% loan interest rate. The extra 3% Jeremy pays above that rate can go back into his policy as additional premium, in the form of Paid-Up Additions (PUAs). This not only boosts his cash value but also increases his death benefit and future dividends.
Each month, Jeremy makes payments into his policy. Over time, the money he’s repaid plus the interest flows back into his cash value. When the loan is fully repaid, he actually has more money in his policy than he did before borrowing it.
What’s the Catch?
You might be wondering, “Okay, what’s the downside?” The main challenge is discipline. If Jeremy doesn’t stick to his repayment plan, he risks depleting the cash value of his policy. But Jeremy is committed to his goals, so he treats this like a real loan. The secret is managing cash flow wisely, just like a successful business would.
A Step-by-Step Breakdown of Jeremy’s Infinite Banking Scenario
Why This Works for Jeremy
By leveraging Infinite Banking, Jeremy avoided taking on debt from the bank, kept his money growing, and maintained full control over his finances. Fast forward five years: the loan is paid off, his policy’s cash value has grown even more, and he now has a fully paid-for SUV in the driveway.
What’s next? Maybe Jeremy uses his policy to pay off some consumer debt, start another policy to save for his kids’ college, or make a down payment on an investment property.
Is This for You?
Here’s the deal: Infinite Banking isn’t for everyone. You need a solid financial foundation and a willingness to commit to the system. But if you’re like Jeremy, focused on building a stable financial future for your family—this could be worth exploring.
The big takeaway? It’s not about getting rich overnight. It’s about thinking long-term, staying in control, and making your money work for you. If that’s the path you want to take, Infinite Banking might just be a game-changer.
Ready to Take Control of Your Finances Like Jeremy?
Jeremy has a clear plan for his family’s financial future, and a big part of that is making smart, intentional money moves. By using Infinite Banking, he’s in control of his finances while building long-term wealth. You can do the same—start with the basics, like creating a budget, and explore how strategies like this could fit into your financial goals.
Click HERE to book a strategy session with me, and let’s get started on putting you in control of your financial future.