When should you repay your policy loans?
Many of you have been wondering when is the best time to repay your policy loans you’ve taken. But this isn’t a “one size fits all” kind of answer. The answer depends largely on your needs and goals.
Here’s what I mean.
You have outstanding policy loans because you had a purpose for that money to serve, right? You needed to pay off debt, or buy a car, or use it for an investment. Whatever the reason for the policy loan, it’s a good idea to determine before you take each loan when would be a good timeline repay your policy loans back to your bank.
The general rule of thumb
If you have a need for that money in the next 60-90 days, don’t repay your policy loans yet. Keep the money in your segregated account and use it when you need it. That’s why you have your own bank in the first place. To use it. So use it!
Let’s talk about applying this 60-90 day rule when you’re repaying debts with your banking policy. If you pay off all your debts, you can begin to consider when to repay your policy loans in the same amounts you were paying towards your debts. For example, if you have a credit card with a $100 minimum payment you paid every month, when you pay the remaining balance on that card continue to make the minimum payments, but direct them back to your policy to repay your outstanding loans.
If you haven’t paid off your debts yet, don’t start to consider a repayment plan until they are all paid off.
Fun Fact: If the credit card company charges you 20% interest and you pay that balance off but continue to make the minimum payments for the same amount of time, guess how much money you just made in interest…20%!
If we apply this method to purchasing a vehicle, you use your banking policy’s cash value to buy the car in cash. Then, just as you would have made payments to the company that financed your car you would make those same car payments back to your policy to repay the policy loan you took to buy the car.
If you’re planning on using your policy’s cash value to invest, you can use your profits from said investment to repay your policy loans. Let’s look at the example of Real Estate Investing. You borrow from your policy’s cash value to purchase a property (this process involves a little more details when going through your RE Investing business, but let’s simplify it for the purposes of understanding how to repay your policy loans). Once you’ve purchased the property, you can begin to make “interest only” payments back to your policy right away. When that property is sold, or once tenants start paying rent, you can then begin to use that revenue to start repaying the principal balance of your policy’s cash value.
Catching on yet?
Whenever there’s a relatively immediate need for your cash value, we don’t encourage you to repay your policy loans, yet.
This is because we don’t want you to have to work harder, longer, take on more risk, or lose control just to benefit from your policy.
But if you use this 60-90 day rule and only make payments back to your policy in the same amounts you already were paying or were going to pay to someone else, this makes for a truly simplified and easy repayment system to implement into your lifestyle.
Of course, for your own specialized approach, don’t forget to speak to your Mapping Specialist. They will be able to give you a customized plan illustrating exactly when and how to repay your policy loans with the unique set of needs and goals you have.
Yes, it’s that simple! No need to overthink it!
When you’re ready to get started on creating your financial legacy or if you have more questions, most questions can be answered by watching this video. Start there and then schedule a consult with my team when you’re ready to begin.
