By financen | December 12, 2019 - 4:57 am - Posted in Banking

If a visitor were to tell you that you could be your own bank, what do you picture? Perhaps you envision building a new bank in your yard. Or, maybe you imagine pulling money from a newly acquired money tree in your garden.

When it comes to increasing your savings and investing in your future, high amounts of debt, or the need to purchase something substantial, like a new roof, can stand in the way. And turning to the bank for assistance is not always a viable option.

That’s where bank on yourself insurance companies come in. They offer a different solution to financial security. But what is it? Does it work? Find the answers below.

What exactly does the term bank on yourself mean?

Bank on yourself is a financial strategy that has recently been re-popularized by Pamela Yellen. Though her book is becoming a widely contested published work, she is not the first person to pitch it. This idea has a goal to use your assets to finance purchases, rather than a loan from a bank while growing your wealth in the process.

When you use a bank on yourself strategy, you use the cash value of your whole life insurance policy to make your large purchase. It is important to note, and something Pamela and her successors say as well, that the policy must be a participating whole life insurance policy. Not all companies and policies work in this scenario.

Your unusual whole life insurance policy will need to have a rider added that allows you to borrow the cash value, essentially becoming your own bank.

Why would people consider this?

This method for saving and growing wealth is appealing to many people because:

  1. You avoid finance charges that a bank would charge
  2. The loan is usually private between you and your insurance carrier, meaning it won’t appear on your credit report
  3. You typically have flexible options to paying back the amount, instead of a set payback schedule that banks require

Is it a good idea?

Though bank on yourself insurance companies pitch this method as a great option for everyone, it has its own caveats. It is built on the premise that insurance carriers pay out more dividends than they collect, which usually is not the case.

Another downside to this type of financing is that it can only be made with certain carriers, limiting your options.

So, what should I do to take control of my finances?

Working to take control of your financial future is an important goal. When you have no savings and high amounts of debt, it may seem like something like a bank on yourself loan is your best option.

However, there may be more options out there than you think.

Meeting with a financial planner or a financial consulting firm can help. They’ll meet with you and discuss your future goals. Then, they create a plan to help you achieve them, setting you up for financial security and increased wealth in the future. This alternative gives you the power to make the best choice for you.

This entry was posted on Thursday, December 12th, 2019 at 4:57 am and is filed under Banking. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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