Conventional Bank vs Private Bank lending – excerpts from White Paper on Becoming your own ‘Banker’

Imagine for a moment that you have gone to a commercial bank and told them you planned on purchasing an asset of real property valued at $1 million and that these were the terms you wanted from them.
• I want to purchase the property without any credit check and based solely on my willingness to commit to level monthly payments.
• I want your bank to guarantee that those payments will never increase.
• I want a guarantee from the bank that the property will never decrease in value.
• I want any growth in equity value to be tax-free.
• If I decide later that I no longer wish to own this property, I want the bank to guarantee that the equity I have built up will be paid to me in cash or as a lifetime income that I cannot outlive and that the property will revert to the bank at no cost to me.
• If I decide that I don’t wish to make payments for some period of time I want the bank to automatically make those payments for me as a loan against my equity at a guaranteed rate of interest.
• If I want to borrow against my equity for any reason, I want the bank to make the loan without question or qualification.
• If I do borrow, I want the bank to only charge me a guaranteed rate that we agree upon before signing the purchase application – even if the loan is requested years into the future – and I want the bank to accept any payments I make, even if they are less than enough to repay the loan.
• If I die prematurely, before the property is fully paid for, I want the bank to pay my heirs the entire $1,000,000 less any loans I have taken, regardless of how many payments I have made – even if I die in the very first month after purchasing the property.
• I want to be able to make extra payments and I want the bank to keep track of them for me.
• Finally, Mr. Banker, I want to pay the bank a few extra dollars each month so that if I get sick or hurt and can’t work the bank will make my payments for me.

A conventional banker finds these terms hideous.  However, if you were to apply those questions to a whole life insurance contract from a mutual company, the answers would all be “YES”!  Your only requirement would be that you qualify medically (if you didn’t – you use someone else as the insured – wife, son, daughter, etc.).

Wouldn’t a bank like that be valuable to you? Wait there is more. Mutual companies’ whole life policies pay dividends. This adds an entirely new dimension to the discussion of why a whole life policy makes a great ‘bank’.

First of all, dividends from stocks that you own are taxable. Dividends paid to mutual company policyholders are considered a return of unused premiums that has already been taxed and are, therefore, paid tax-free and grow tax-free as long as they remain within the policy.

Unlike reinvested stock dividends, a whole life contract guarantees that you’ll never lose the dividends you leave in the policy. You can take the dividend a number of different ways but the most beneficial option, however, is to use them to purchase additional single premium life insurance, called paid up-additions (PUA’s). Why?

• The paid-up additional insurance death benefit requires no qualification of any kind. It requires no proof of insurability and no need to justify the additional death benefit.

• The cash value of the dividend used to purchase the paid-up insurance becomes a guaranteed cash value and enhances the cash value of the basic policy.

• The paid-up additional insurance cash value grows unencumbered at the same rate as the basic policy and pays dividends itself as long as the policy is in force.

• The dividend paying practice that works the best as your ‘bank’ pays dividends on the base policy and also on the paid up additional insurance, even when the policyholder has borrowed money from the policy.

• There are, finally, no commissions paid on additional insurance purchased with dividends so all of your dividend dollars, minus only a small set-up charge, go to work for you immediately.

There are other types of cash value insurance policies available but only the dividend paying whole life insurance policy from a mutual company has proven over time to be the best solution. It is also imperative that it be structured properly. It must be designed to maximize cash value (your ‘bank’ money) and minimize the death benefit.

This is the opposite of the way these policies are sold by ‘normal’ insurance sales people.

In summary, what you must do is repel the Debt Paradigm that teaches you to Earn/Borrow from others, and Spend, Repay others and maybe save a little for the future

and replace it with Earn, Bank, Borrow from your ‘bank’, Spend, Repay yourself and recapture all of the money that flows through your life in your own ‘banks’.

Excerpts from – White Paper on Becoming your own ‘Banker’ by Dan M. Maga

Want to compare your assets with owning your own banking system, take this comparison quiz now?

Share

November 16, 2010 · Jennifer · No Comments
Tags: , , , , , , , ,  · Posted in: BANKING with INSURANCE, Conventional Bank vs Private Bank Loan

Leave a Reply