Favorite BYOB, Infinite Banking Concept System Video?

[DHK]

My policy is earning 6.1%, my loan is 5.5%. Seems like a pretty good deal to me.

%'s alone is not enough to evaluate a strategy. You have to look at the VOLUME of interest and the actual dollars charged.

Yes, there CAN be positive arbitrage, but you're certainly not going to get rich or even maintain pace with inflation with only a .6% spread (without assigning dollar amounts to the volume of earnings and interest charged).

 

[Lloyds of Lubbock]

Debating loans can be a frustrating experience and we are not even talking about direct recognition.

 

[Allen Trent]

Since my cash value never left it's still earning dividends.

Make sure you know if your carrier or the carriers you write are Direct or non-direct recognition of the loan. Direct regnition carriers will mean the Dividend rate is lower on the CV pledged as collateral for the loan. Have listened to many agents state that taking loans from your WL has no impact on the performance.

 

[DHK]

It almost doesn't matter.

If you have a direct recognition carrier AND you pay the annual loan interest due each year out of pocket... your policy can continue to grow, per the illustration.

But the problems occur (on ANY policy really) when you don't maintain the loan and don't pay the annual loan interest.

 

[Lloyds of Lubbock]

Direct Recognition does not mean your dividend is lower.
It means the dividend is effected by loans.
For what it is worth Guardian on old policies charges 8% on a loan.
Depending how old the contract is credits back 7%, the older the policy the higher the crediting back until 20 years and age 65.
The dividend on loaned money is higher than unloaned money currently.
I believe NML has a 7.25 credit, that never changes
If and when interest rates go up this will reverse itself and dividends will be negatively effected by loans.
If you read the first edition of Nelson Nash's book the illustrations are from Guardian software.

 

[jcorr]

Make sure you know if your carrier or the carriers you write are Direct or non-direct recognition of the loan. Direct regnition carriers will mean the Dividend rate is lower on the CV pledged as collateral for the loan. Have listened to many agents state that taking loans from your WL has no impact on the performance.

It's a non-direct recognition company.

 

[Allen Trent]

It almost doesn't matter.

If you have a direct recognition carrier AND you pay the annual loan interest due each year out of pocket... your policy can continue to grow, per the illustration.

But the problems occur (on ANY policy really) when you don't maintain the loan and don't pay the annual loan interest.

I would be interested to know what you mean it almost doesnt matter. If my policy has a $100k CV & I borrow $60k against it and only pay interest, isnt the $60k outstanding loan balance going to receive a much lower dividend rate with Direct recognition carrier. Lets say I have that loan balance for 15 years & then pay it off in full. Wouldn't I have missed out on substantial dividends over that 15 years & thus my policy total cash value & total face amount with PUAR be much lower.

I am hoping I have misunderstood somehow how it works & you can clear it up for me. I like your way of thinking on this better than mine.

 

[jcorr]

According to http://www.ubsnet.com/assets/Uploads/Newspdf/Mobile-News/DividendHeatSheet1-25-18.pdf NML has a 4.9 dividend for 2018.

 

[Lloyds of Lubbock]

Nice chart, funny that a stock company put it out.
It is good info but remember the dividend crediting rate is only one part of the dividend.
Mortality and expense contribute heavily to the return.

 

[DHK]

I would be interested to know what you mean it almost doesnt matter. If my policy has a $100k CV & I borrow $60k against it and only pay interest, isnt the $60k outstanding loan balance going to receive a much lower dividend rate with Direct recognition carrier. Lets say I have that loan balance for 15 years & then pay it off in full. Wouldn't I have missed out on substantial dividends over that 15 years & thus my policy total cash value & total face amount with PUAR be much lower.

I am hoping I have misunderstood somehow how it works & you can clear it up for me. I like your way of thinking on this better than mine.

I did a "case study" using an Assurity max-funded WL policy (a direct recognition company), age 35, male, non-smoking, standard, and $10,000 annual premiums.

Now, all of this is from memory as I don't have that information right now and it would take me a couple of hours to put it back together.

In the 10th year, I illustrated a $50,000 loan outstanding for 5 years, then repaid in full.

During the 5 years, I showed the cash values still growing when the loan interest was paid out of pocket... and I also showed an example of the cash values declining slightly when the interest was not paid out of pocket.

In essence, the loan interest payment IS "the posted dividend" because the gain only came in when the loan interest was paid. It may not be "technically correct", but the cash flow illustration shows that's what's happening. The illustrated dividend may have been reduced, but the policy gain was still there.

I was just looking for a gain vs a loss during the time of an outstanding loan. I didn't measure it compared to not taking out the loan in the first place.

I was looking at it on a year-by-year basis, not necessarily long-term borrowing.

Again, this is from memory of a line-by-line analysis I did.