For example, we might pay interest rates of 6 to 13% on a car loan or credit card, while we earn as little as 1 or 2% on a savings account, and hope to average 7 or 8% on a 401K account!
But now there's a way to become our own bankers and profit from our own borrowing. Because now we can set up our own bank and pay interest to ourselves on our own terms and without any application or loan approval process.
It's called Private Equity banking and is made possible by Internal Revenue Code section 7702. Which allows us to put money into what the IRS refers to as a "qualified" contract with a "legal reserve" insurance company.
This provision of the tax code allows us to transfer money from our savings, or investment accounts, into one of these "qualified" contracts, continue earning interest or dividends without any taxation or investment risk, and then borrow up to 90% of this money using the contract "equity" as security or collateral.
Of course there is an internal cost or charge to borrow the money, in much the same way that banks must pay depositors for the use of their money.
Which means that we are obligated to pay off these loans with interest. Just as we do with a credit union, bank, or finance company.
But with our own "bank", our loan collateral continues to earn interest, or dividends, without any taxation, or investment risk. So our bank equity continues to grow, while we use the money, anyway we want.
What's more, there is no application, or qualification required. No credit check or reporting to any credit agency. And no delay in getting the money.
You simply submit a one page form and get the money by check or direct deposit. Usually within 48 hours.
And, like a revolving line of credit, there be is no mandatory repayment schedule. So we determine the repayment amount, the months or years for repayment, and the interest rate we pay back into the contract.
And, any interest we pay over the minimum, is a profit for us, which is added to our bank equity.
This is the same way that banks and finance companies profit from lending money. However, before we can borrow any money, we must capitalize our private equity "bank" by transferring money into the contract that would otherwise go into our savings and investments.
This might include a percentage of our monthly income. A yearly bonus from our employer. Annual tax free funds from the government. Or an inheritance from our relatives. As well as money we've already saved in other accounts.
But once our "bank" is sufficiently capitalized, we can borrow against the contract "equity" at any time and as often as we want. Without any credit check, or loan approval process.
We can simply submit a short one page form to borrow up to 90% of our bank equity, and the money in is either sent to us by check or deposited electronically into a checking account within a day or two.
Some contracts even provide debit cards that we can use to access our funds. Similar to a revolving line of credit.
Once more, we decide when we want to begin paying off our loan, how much we want to pay, and how often we want to pay it.
However, we want to have all our loans paid off by the time we retire, so that we can then supplement our retirement income with tax free money from our private equity bank.
And if the contract is properly structured, any loan debt remaining at the end of our lives will be contractually paid off for us tax free.
To learn more about setting up your own private equity bank, talk with a WFGInsuranceQuotes.com licensed professional today. Our Indexed Universal Life policies will help you build cash value and growth with tax free loans to help you in life and retirement.