Imagine 10 people each contributing $100 into a company, which represents an insurance company that administers the system for the Infinite Banking Concept (IBC) to function. The monetary input from these individuals comes in the form of policy premiums, paid-up additions (PUA, as referred to in the Becoming Your Own Banker book), or an Excellerator Deposit Option (EDO). This “company” guarantees each owner that their money will grow and earn more than the amount initially placed in the system, promising, for example, a 7% growth rate.
Now, suppose one of these individuals wants to borrow $50 using their initial amount as collateral. They take out the loan with interest, set at a reasonable 6.5%. The interest charged is deducted from the growth of the individuals access to the money pool within the system. As the borrower repays the loan with interest, by the end of the loan term, they would have paid back $53.25 (the initial borrowed amount of $50 plus 6.5% interest). Now, they have access to borrow $53.25 if they choose to do so again.
Moreover, the guaranteed growth of the money pool is exceeded by the “company,” meaning the company earned more than it initially expected. After setting aside a portion for its own rainy day fund, the company distributes the remaining excess revenue to everyone who contributed money—these are the policyholders. This excess is known as a “dividend,” though it is not treated in the same way as traditional dividends. Crucially, once a dividend is credited to a policyholder, its value cannot decrease and it cannot be taken back.
This process not only ensures continuous growth of the policyholder’s wealth but also creates a self-sustaining financial system where borrowing and repaying within the policy strengthens the financial position of the policyholder over time. The ability to borrow against the policy and repay it while still earning dividends makes the IBC a powerful tool for personal financial management and wealth building.
I hope this adds another valuable tool to your toolbox, helping to simplify the process and clarify how straightforward it truly is when you break it down. My goal is to eliminate any confusion and make this concept easier to grasp.
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