BY amfcon This is where some people get confused!!! Why take a loan when I have cash in my savings account? Why the loan better than taking cash out of savings?
Wealthy business owners will tell you, never withdraw money from your investment or insurance account or cash value account. Let it grow because it will generate more savings from compounded interest. Let’s take an example. You are buying a house and the mortgage rate is 3%. On the other hand, you are receiving 7% on your investment. Would you take money out of your investment to buy a house or take a home mortgage loan?
IUL investment cash value is what we’re talking about. Insurance companies are required by state statutes in America to make loans to their policyholders against the cash value of the policy. The cash value can be used to generate more income by borrowing against it. As a result, you may be paying 5% interest on the loan, while the cash value in your life insurance policy may earn 7.5% on average. When the market is positive, the rate of return for cash value will outpace the loan balance. You will be making 2.5% and paying no tax.
It’s like this: you have $100,000 in your insurance cash value account and you took the loan at 5%. The $100,000 cash value of your account will never change. You still have $100,000 in your account and it will continue to accumulate an average of 7.5% every year. In return, you are paying back 5%. The cash value $100,000 is earning 2.5% (7% – 5% = 2.5%). Usually, business owners call it “Taking a loan from their own bank.”
