How Infinite Banking Works

How Infinite Banking Works is Part 3 of The Infinite Banking Concept Series. Go to the end of the article for the rest of the series.

As said before, the Concept is a process. It is all about financing your purchases through your bank. Imagine creating wealth without chasing stock prices, running around town for real estate, watching 401k retirement plans plummet, and worring about the end of Social Security retirement benefits.

You can watch your money grow as you utilize it today and not just in your golden years. We will walk you through how it works and discuss an example.

How the System Works...

As Simple as 1-2-3

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  • You fund your whole life insurance policy, paying the base premium and whatever more you can into the PUA rider. The early years of the policy will pay for the agent's commission and administrative fees. Think of this as starting your banking business.
  • After you have ample cash in your policy and are ready to purchase a big ticket item (car, TV, home renovation, vacation, etc.), you take out a policy loan. The cash value stays in your policy, continuing to earn interest. This is one of the advantages of whole life insurance You lose that opportunity for growth with 401k loans.
  • Pay back the policy loan with the same amount of interest you would pay back a bank or a financing institution. You will recapture the entire cost of the purchase item and interest you would have paid a bank.

A Simple Example of the Infinite Banking Concept at Work

Here's the sample situation. Let's say you buy a $30,000 car every 4 years for 40 years. That's 10 cars total.

Financing a Car Through a Bank


  • At ABC Bank, you finance the car at 5% interest for 48 months. This brings your monthly payment to $690.88.
  • At the end of your term for the first car, you have paid ABC Bank a total of $33,162.24 (3,162.24 in interest).
  • At the end of 40 years, you would have paid the bank a total of $331,622.40 (31,622.40 in interest).
  • This means you have a 4 year old car but you do not have the $331,622.40. The lost opportunity cost, an eroding factor of money, is the missed ability to earn interest on the total amount.

Financing a Car Through via the Infinite Banking Concept

  • You take a $30,000 policy loan and you finance the car at 5% interest for 48 months. Meaning, you pay back your cash value $690.88 per month.
  • At the end of your term for the first car, you have paid the loan a total of $33,162.24 (3,162.24 in interest). BUT, your cash value has grown to $35,095.76 (assuming a 4% APY) because your money never left the policy. You actually earned $1933.52 in this transaction.
  • 40 years pass and you continue borrowing from your policy and paying it back, just like you would at a bank.
  • At the end of 40 years, you have the same 4 year old car but you also have $144,030.62 (assuming a 4% APY).
ABC BankInfinite Banking System
Total Outlay$331,622.40$331,622.40
Term40 years40 years
Cash After Term-$331,622.40$144,030.62

What's the difference?

$144,030.62 - (-$331,622.40) = +475,653.02

That's a difference of almost half a million!.

Obstacle...Not Disadvantages

There are a few obstacles when building your infinite banking system. I do not call them disadvantages because they do not hinder the performance of this process

  • Start-up Costs - Many people think they have to "come up" with the money in order to pay the premiums. There are a few simple strategies free up cashflow so the impact to pay the premiums will be none or minimal.
  • Patience - When creating your bank, it takes time for the cash values in the policy to grow. This is mainly due to the agent's commission and administrative costs. Think of this as start-up money for creating your business - Your Banking Business.
  • Backbone - This is more of a comical entry but this can affect you. Whole life insurance itself is a subject that many do not understand. When people hear you are buying whole life insurance, you may end up getting lectured on term vs. whole life insurance.

    If you tell them of the Infinite Banking Concept, they may say you are crazy. For this reason, we pick and choose our battles. Just be careful because the topic of Finances can get really heated quick.

Can it work for you?

The infinite banking concept has nothing to do with investing and has everything to do with financing.

"You finance everything you buy. You either pay interest to someone else or you give up the interest you could have earned otherwise."

-R. Nelson Nash

If you buy anything, then this strategy can work for you. All it takes is an understanding of how it works, and you can put this system on autopilot.

In all of our experience, this process of utilizing and financing with whole life insurance has been our bread and butter. We have invested in real estate, hard money loans, and penny stocks. None of those investments can even compare to the success of our banking policies. Honestly we get excited thinking about the infinite possibilities that exist with the infinite banking concept.

There is no other guaranteed, safe, and secure way to grow your wealth than through becoming your own banker.

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