Thank you for your response – it was helpful… Perhaps, on a future blog, you might show us an example of the difference between an amortized loan and this loan situation you are describing.

Thanks again!

That’s correct. Policy loans are more similar to Home Equity Lines of Credit. You only pay interest on the outstanding amount. So, when you make a payment back to the policy it will reduce your principal and you’ll only be paying interest on the new principal balance. This means that more of your payments go towards the principal and less towards the interest. Over time, your principal gets reduced quicker than with a straight amortized loan. Sometimes the difference is staggering, other times, not so much. Depends on the scenario.

It’s actually a lot of fun for me to share the comparisons with clients so they can see how changing their HOW not their WHAT can have a huge impact on their bottom line.

I hope that answers your question. If not, feel free to respond.

All the best!
Scott

I found your site on a Google search and am enjoying your blog. You state, in this blog post, that whole life insurance policy loans are structured differently than bank loans which results in a faster payoff.

Can you clarify what the difference is please?

Thanks!