People researching the Infinite Banking Concept (IBC) with Whole Life insurance often believe there is some magic mechanics to taking a policy loan. In reality, the science of compounding, leverage, and arbitrage is what can maximize your Infinite Banking Strategy.
The use of cash value lines of credit programs (CVLOCs) can help lower your rate substantially and increase the IRR of your cash flow.
This video explores the math behind some scenarios where full leverage is applied to test the efficiency of the arbitrage under different hypothetical loan interest and growth rate scenarios.
Timestamps for Description:
0:18 = Dispelling myths about borrowing and the Infinite Banking Concept
1:40 = Explaining the inputs in this example borrowing against Whole Life
3:04 = Showing the power of rate arbitrage with a lower CVLOC rate and higher Whole Life growth rate
4:28 = How you can bail out of the CVLOC programs
5:01 = How paying simple interest while earning compound interest yields a benefit even if at the same 5% rate
6:05 = Explaining what IRR means along with an example of how it’s calculated when paying loan interest when borrowing against your full Whole Life premium
6:35 = How the IRR of loan interest payments exponentially increases when the loan interest rate decreases from 5% to 3.5% and then as low as 3% (which is available in 2021)
7:45 = Seeing the effect on IRR when you pay loan interest on Whole Life insurance premiums for 25 years
8:33 = What happens to the IRR when you increase the loan rate and decrease the growth rate to see if borrowing against Whole Life insurance still presents a valuable arbitrage proposition.
9:31 = The dilemma of getting too big of a policy you can’t fully overfund now or too small of a policy you won’t be able to overfund later.