The Truth About Infinite Banking Loans and Interest

One of the most common sales lines in the infinite banking world is also one of the most misleading. You’ve likely heard it before: “When I borrow from my life insurance policy, I’m paying the interest back to myself.”

It sounds compelling. It sells policies. But it is not how the mechanics actually work. Understanding the truth matters, because mismanaging expectations around policy loans can undermine the entire strategy.

Where the Loan Really Comes From

When you borrow from a cash value life insurance policy, the carrier is not handing you your money. They are lending you their money, secured by your cash value.

If you have $100,000 in cash value and request a $50,000 loan, the carrier lends you $50,000 at a stated rate, often around 5%. That 5% interest is owed to the carrier, not to you. There is no free lunch. You are using their capital, so they earn the interest.

What Actually Happens to Your Money

Here’s where the real benefit lies. While the carrier’s $50,000 loan is outstanding, your full $100,000 continues to earn guaranteed growth and, if the policy is with a mutual carrier, dividends as well. This is what makes policy loans powerful: you can use capital while your base keeps compounding as if untouched.

But make no mistake. The interest on the loan is not being paid back into your pocket. It is paid to the carrier. The advantage is that you gain uninterrupted compounding and flexible access to liquidity.

Where the Confusion Comes From

Some promoters blur the truth by showing an example where you borrow at 5% from the carrier but “repay yourself” as if the loan were at 8%. In that case, the extra 3% is voluntarily added back to your policy. That is not the carrier’s doing, and it is not “paying yourself interest.” It is overfunding repayments into your policy to accelerate growth.

This can be a useful discipline, but it should not be confused with how the loan mechanics work.

Why Clarity Matters for Christian Investors

Faithful stewardship requires honesty, both with ourselves and with those we lead. Proverbs warns against empty promises and false balances. In the same way, we cannot build a financial legacy on half-truths.

Infinite banking done correctly can create guaranteed growth, liquidity, protection, and legacy leverage. But it must be built on clear mechanics, not clever marketing lines. That clarity helps you steward profits with wisdom and confidence.

When you understand how policy loans truly function, you see the power for what it is: uninterrupted growth combined with flexible access to capital. Not a magic trick, but a proven system that has lasted through every economic storm of the last century.

If you are ready to explore how this strategy can protect your wealth and create long-term certainty, book a discovery call today. Book in here.