Taking a Loan Against Life Insurance Policy?

[bear99]

Hi all,

New here - I was hoping you guys could answer a couple questions I have...I hope this is an OK question to pose in this forum. If not- I apologize mods!

Basically, I’m in a situation where I need to come up with cash (roughly $5,000) fairly quickly. I’ve been doing some research and I know I can take out a loan against my life insurance policies. I have a few policies already (thanks grandpa, godparents) that have built up some significant cash value - both have over $5,000. I do not know what kind of policies they are, but I can find that out later tonight.

Is it a bad idea to take out a loan against the policy? From my understanding, I would only have to pay back the interest at the very minimum and if I do not pay the whole loan back by the time I pass away, whatever I owe is simply subtracted from the policy pay out?

So, for instance, if I have a $25,000 policy that has a current cash value of $6,000 and I take $5,000 of that cash value now and only pay back $3,000 by the time I die, the life insurance pay out would be $23,000? Am I getting the gist of it?

Also, are their types of life insurance policies where this is better or worse to do? This is all greek to me, despite the research I’ve been able to do.

I’ve spoken with the agent who is managing one of the policies and he recommends NOT to do this.

Thoughts? Advice? Thanks for your help!

 

[WinoBlues]

Really not enough information.

First, who is the owner of the policies?

How to best access the money will be determined by several factors. One is what type of plans they are. Loan, withdrawal, partial surrender or surrender. Next, are you going to pay the money back into the policy (s)? How is your health? How old are you? Does the beneficiary need these policies?

If these are old UL policies you could be better off surrendering them. If they are old participating whole life the dividends_could_ be sufficient to pay the interest and maybe some principal.

I have recommended loans to full replacement. Really depends on a full understanding of your situation.

I would have been more leary of the old agent 's motivation if he would have just tried to rewrite you. Assuming you have a good relationship with the old agent I would have him give you all your options if you take the money.


Lee

Hi all,

New here - I was hoping you guys could answer a couple questions I have...I hope this is an OK question to pose in this forum. If not- I apologize mods!

Basically, I’m in a situation where I need to come up with cash (roughly $5,000) fairly quickly. I’ve been doing some research and I know I can take out a loan against my life insurance policies. I have a few policies already (thanks grandpa, godparents) that have built up some significant cash value - both have over $5,000. I do not know what kind of policies they are, but I can find that out later tonight.

Is it a bad idea to take out a loan against the policy? From my understanding, I would only have to pay back the interest at the very minimum and if I do not pay the whole loan back by the time I pass away, whatever I owe is simply subtracted from the policy pay out?

So, for instance, if I have a $25,000 policy that has a current cash value of $6,000 and I take $5,000 of that cash value now and only pay back $3,000 by the time I die, the life insurance pay out would be $23,000? Am I getting the gist of it?

Also, are their types of life insurance policies where this is better or worse to do? This is all greek to me, despite the research I’ve been able to do.

I’ve spoken with the agent who is managing one of the policies and he recommends NOT to do this.

Thoughts? Advice? Thanks for your help!

 

[bear99]

Really not enough information.

First, who is the owner of the policies?

How to best access the money will be determined by several factors. One is what type of plans they are. Loan, withdrawal, partial surrender or surrender. Next, are you going to pay the money back into the policy (s)? How is your health? How old are you? Does the beneficiary need these policies?

If these are old UL policies you could be better off surrendering them. If they are old participating whole life the dividends_could_ be sufficient to pay the interest and maybe some principal.

I have recommended loans to full replacement. Really depends on a full understanding of your situation.

I would have been more leary of the old agent 's motivation if he would have just tried to rewrite you. Assuming you have a good relationship with the old agent I would have him give you all your options if you take the money.


Lee

I will try and get more details on the policies once I get home from work today.

I'm a 26 year old white male. Excellent health. Stable job (that doesn't pay enough...) I will eventually be paying the money back into the policy. It might take me a couple years but I know that I will pay everything back. I am the owner of the policies. I assumed ownership a few years ago, once I graduated from college. Current beneficiary is my father, who does not need the policies as much as my kids/wife will many years down the road.

 

[WLTHKR8R]

Some other options are:
Do you have a 401K from work? Find out if your employer allow borrowing against it. Generally, you can withdraw up to 50% of the value so you would need to have at least 10K for 5K loan. Interest will be paid to yourself.

If you have a good credit, apply for a credit card and make a cash withdraw, sometimes you can find 0% up to 1yr.

Best of luck to you!!