What Is The Infinite Banking System And How Does It Work?

What Is The Infinite Banking System And How Does It Work

The infinite banking system has been creating a spark on social media. However, it is not really as new as you may think it to be. This is a concept where permanent life insurance holders would become their own bankers. They take advantage of the growth of cash value and take loans against that money.

The infinite banking system is publicized as a technique to sidestep the traditional banks and lenders to develop wealth. However, it is a lot more complicated in comparison to what social media turns out to be.

There is a lot more that you need to know about the infinite baking system in order to become your own banker.

In this article, we shall dig deep into the details of the infinite banking system and figure out if it is the right choice for you.


Key Takeaways 

  • An infinite banking system refers to the processes or series of activities through which a person may take up the role of a bank. This concept was first proposed by Nelson Nash in his book Becoming Your Own Banker.
  • The feature of Infinite Banking is that its overall framework depends on the policy of Whole Life Insurance. An individual will have to pay 10% of their regular income to retain and sustain their whole life policy. Lower loan interest over the policy in comparison to a conventional loan product will get collateral from the wholesale policy’s cash or the surrender value.
  • It is a concept that lets the policyholder take loans on the policy of whole life insurance. It must be available even when an individual deals with any minor financial burden. These types of loans mainly help to overcome financial load as such.
  • The Whole Life Insurance surrender value or cash acts as collateral when one applies for a loan.

Infinite Banking System Explained 

Infinite Banking System Explained

The Infinite Banking System is the adaptation of the book by author Nelson Nash “Becoming Your Own Banker.” In the book, Nash explains the practical application of the policies of life plan insurance, which deliver dividends.

When an individual takes ownership of policies like these, they may dictate all of their terms and effectively use the cash flows by leveraging themselves instead of reaching out to the lenders or the bankers for a loan.

The infinite banking system particularly looks through the surrender value of the whole life insurance. This surrender value plays the role of cash collateral for a loan. The policyholder would need to connect with the insurance company in order to request a loan on the policy. An individual may term the Whole Life insurance policy as the product that offers protection or covers the life of an individual.

In case of the probable death of the individual, it offers financial security to all of their family members. This wholesale policy gives out strong dividends, which would then add to the efficient cash value of the insurance policy. As soon as the policy becomes effective, it will contain a cash value on which anyone may take a loan and keep it as a collateral policy.

Generally, an infinite banking system performs better when the individual depends totally on the banks themselves. Concepts as such perform well for people who have a stern financial cash flow. One must only take up these policies if they are financially healthy and can deal with the premiums of such policies. You may have to pay yearly, quarterly, and monthly premiums.

Features Of Infinite Banking

The features of infinite banking may include the following:

  • The entire framework of infinite banking would depend on the whole life insurance policy.
  • An individual must always pay 10% of their regular income to be able to maintain and sustain their whole life insurance policy.
  • The loan rate of interest over the policy is relatively lower in comparison to the conventional loan products.
  • The collateral derives within the cash or surrender value of the wholesale insurance policy.

Advantages And Disadvantages Of Infinite Banking System 

The infinite banking system has its own advantages and disadvantages when it comes to its application, fundamentals, and functionalities. These factors that lie on the extreme end of the factual spectrum are explained below.


  • The entire value of a whole life insurance policy is an extremely liquid instrument that is taken up as collateral.
  • During financial hardships and crises, an individual may make use of such products to get loans. This helps in mitigating the problem.
  • It provides the lowest cost of finance in comparison to the products of conventional loans.
  • The loan of the insurance policy may also be available when a person does not have a job or is going through any health issues.
  • The Whole Life Insurance policy will always retain its total value. Its performance does not have any link with its market performance. Hence, one may conclude that these products are more like conservative products.
  • The loans over such products are generally tax-free. One may use them as delayed growth products.
  • You may also transform an infinite banking system into an estate planning product. These products may transfer to dependent individuals through inheritance.


  • Every individual should be eligible for taking the whole life policy.
  • The premium for the Whole Life Insurance Policy is usually very hefty. This leaves a huge financial burden on an individual and constrains their financial resources.
  • If the financial hardships continue for a long time period, then there could be a chance that the individual will not be able to get loans like this and may even end up defaulting on them.
  • In easier words, the individual may not be able to make sufficient payments over the policy.
  • Imagine the individual lacking financial planning or conviction over utilizing such loans. In such a case, an infinite banking system is probably not the correct methodology for those individuals.
  • These products would only favor individuals who would have a sound financial background.
  • They need to display the utmost level of financial discipline.
  • These products will not obey the diversification principle.

The Bottom Line

Infinite banking system is a clever way in which individuals may invest in Whole Life Insurance which would provide them financial support in times of need. However, it is not always the best option for many people.

For instance, one needs to have an extremely strong financial background in order to invest in such a banking system. Along with that, they also need to pay premiums, which are 10% of their monthly income. Maintaining this needs extreme discipline and is not possible for many. Hence, an infinite banking system may not be the best fit for everyone. But if you want to give it a try, make sure you are sticking to it till the very end.

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Upasana is a budding journalist who has a keen interest in writing. She considers writing as therapeutic and is most confident when she writes. She is passionate about music, movies and fashion. She writes in a way that connects with the audience in a personal level. She is optimistic, fun loving and opinionated.


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