Cash Value Line of Credit, Loan, Etc. Programs

That's interesting option if exists.

Currently the carriers we use offering at 4.75 and 4.25 % and can loan 92% of CV and up to 95% on special request.

With that, just haven't seen the need but if you collateral assign a portion you then couldn't loan from the Insurer unless the bank would use the db as collateral vs the CV..
 
That's interesting option if exists.

Currently the carriers we use offering at 4.75 and 4.25 % and can loan 92% of CV and up to 95% on special request.

With that, just haven't seen the need but if you collateral assign a portion you then couldn't loan from the Insurer unless the bank would use the db as collateral vs the CV..

The cash value line of credit is more favorable -- first, the entire policy stays in tact, fully performing, full crediting, dividend, etc. There is no drain or reduction on the policy as there is no loan. Second, while you can get a line of credit up to 95% of the cash value, you only use and pay for what you want and need. The checkbook sits in your drawer until you need/want it. As far as "couldn't loan from the insurer..." -- that's my point exactly -- once you have a line of credit, then you have no need to borrow from the policy.

When I found the first bank offering this program -- I was my own first client. It was perfect. At the time, I got a line of credit, a checkbook, and the line was for 95% (I think it was 95% at the time, but I know it's 95% today) of the cash value, and my rate was 3.75%. Today my rate is 3.45%.

I wish more banks offered programs like this.
 
Well, setup correctly with the right carrier, the same exists as far as fully performing, crediting, dividends etc, regardless of loans. There is no drain on the policy as you called it.

If the bank would assign to the db you could use that line as well as borrow from the insurer against your cv. But I'm assuming if setup for cv borrowing they attach to the CV.

Also if you can get from Bank at less than insurer get it there. I always tell our clients if you can get money at the bank for less than we charge I'd be nuts to tell you otherwise. Use their money and leave your collateral at the insurer unencumbered.

Now the checkbook, that's nice ;)

Had a guy with a deal on a Porsche and had to have the cash in 24 hours, we got the loan processed and wired but was a hassle.

I'd like for you to keep me abreast of the situation if you find this again. Would like to make it available.
 
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The cash value line of credit is more favorable -- first, the entire policy stays in tact, fully performing, full crediting, dividend, etc. There is no drain or reduction on the policy as there is no loan. Second, while you can get a line of credit up to 95% of the cash value, you only use and pay for what you want and need. The checkbook sits in your drawer until you need/want it. As far as "couldn't loan from the insurer..." -- that's my point exactly -- once you have a line of credit, then you have no need to borrow from the policy.

When I found the first bank offering this program -- I was my own first client. It was perfect. At the time, I got a line of credit, a checkbook, and the line was for 95% (I think it was 95% at the time, but I know it's 95% today) of the cash value, and my rate was 3.75%. Today my rate is 3.45%.

I wish more banks offered programs like this.

Curious as to what bank offers that? Also, what do they require for loan payments? Structured payments or not? P&I or IO? Thx
 
This seems like "much ado about nothing". For one thing, if I can get a loan from the insurance company against my cash vale for 4%-5%, is there a bank that will match or eat that rate?

Second, a policy loan doesn't affect the growth of the policy because of the loan assuming you have a non-direct recognition policy. The loan interest rate plus any dividend reduction is simply the cost of obtaining the loan and is still likely to be less than the bank's loan rate.

Third, the bank loan will have structured payments just like any other commercial loan. The policy loan will be unstructured - you control the timing and amount of the loan repayment.
 
This seems like "much ado about nothing". For one thing, if I can get a loan from the insurance company against my cash vale for 4%-5%, is there a bank that will match or eat that rate?

Second, a policy loan doesn't affect the growth of the policy because of the loan assuming you have a non-direct recognition policy. The loan interest rate plus any dividend reduction is simply the cost of obtaining the loan and is still likely to be less than the bank's loan rate.

Third, the bank loan will have structured payments just like any other commercial loan. The policy loan will be unstructured - you control the timing and amount of the loan repayment.

Is there a bank that will match or beat that rate? Yes. In my opinion, this is far more than much ado about nothing. Apparently many people don't know about it, yet it's a new use, another dimension for collateral assignment, accessing funds, etc.

That said, being that this is only for whole life, from mutual companies -- at least the programs I've seen for years -- not all companies/policies are non-direct recognition. The dividend reduction, and any additional "costs" -- the cost of obtaining the loan -- is not going to lower than the bank rate all the time. In addition, the policy loan rate, with no dividend reduction, by itself won't always be lower than the bank rate. That's the point. I've looked at innumerable policies, borrow rates, etc. -- and clients have used many for collateral for these types of loans -- and there is no doubt there is value here. While this may not be "mainstream" so to speak, and that surprises me, it is another option or opportunity.

In addition, two of the programs I've been using are IO (during the initial term) line of credit programs, much like common HELOC loans.

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Curious as to what bank offers that? Also, what do they require for loan payments? Structured payments or not? P&I or IO? Thx

The two most common programs I am seeing today -- actually two of the most favorable -- are Valley National Bank and Investors Bancorp/Investors Savings Bank.
 
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This seems like "much ado about nothing". For one thing, if I can get a loan from the insurance company against my cash vale for 4%-5%, is there a bank that will match or eat that rate?

Second, a policy loan doesn't affect the growth of the policy because of the loan assuming you have a non-direct recognition policy. The loan interest rate plus any dividend reduction is simply the cost of obtaining the loan and is still likely to be less than the bank's loan rate.

Third, the bank loan will have structured payments just like any other commercial loan. The policy loan will be unstructured - you control the timing and amount of the loan repayment.

I agree Larry. Having a bank loan or line of credit has alot more moving parts to it, most of which aren't beneficial to the client.

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WMG.... I agree, it could be another option for the client. Though personally, I feel a policy loan is a better option in most cases.
 
I agree Larry. Having a bank loan or line of credit has alot more moving parts to it, most of which aren't beneficial to the client.

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WMG.... I agree, it could be another option for the client. Though personally, I feel a policy loan is a better option in most cases.

I suggest that any life insurance professional who might even remotely consider this -- for themselves or for a client -- do ALL the due diligence; which I did. I actually worked with a bank in developing a program for this, and ironically, they worked in conjunction with a major, premier carrier on developing their own program. From my due diligence, it appears to be a very beneficial option -- and depending on the carrier, policy loan details, etc. -- could be less costly. A one page application, 24-48 hour approval, collateral assignment, and a simple, clearly spelled out line of credit -- may not be so simple to some. My feeling is, if that's the case, then don't do it.

As far as the policy loan, in looking at non-direct recognition whole life policies, Guardian and Mass Mutual whole life policies in certain cases -- if the policy loan is 7% or 8% (net lower as loan interest is charged in advance) -- and there is a reduction in the dividend (even if it is internal or "accounting only") -- even with a dividend of 7%, which is irrelevant (because of mortality and expenses); a line of credit at 3.5% is less costly. Sure, there's other things to consider, without question. However, the economics are simple to quantify.

As far as a policy loan being a better option in most cases, personally I hate being generic and dealing in the abstract -- however, I don't think that statement can be made and true in absolute terms; that being "most cases". Perhaps that's true on your block of business. It might be true for a % of my block of business. However, I have without question, seen numerous situations where the line of credit is clearly and without question a better option -- and that's just not my opinion, but shared by others. We should all have different opinions. That's how we keep learning. I am sure for one policy and one client a policy loan is a better option, and for another client and another policy, the line of credit is a better option...and for a third client and third policy a traditional loan via a collateral assignment is a better option; and so on.

My original post was asking if members here know of banks offering this type of program. Valley National and Investors Savings are just two. If members here knew and had experience, I was hoping to hear about it. Discussing the merits of any program is certainly a byproduct, but wasn't the focal point of my question.

If a professional does ALL the due diligence and likes it, use it. If not, don't use it.

Thanks for all of the information everyone.
 
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I came across your thread on CV line of credit lending facilities. I have a client who has an exisiting line of credit with Valley National Bank. His previous insurance broker had told him that Wells Fargo Bank had a fixed line of credit product available. I inquired high and low within Wells Fargo a few months back while I was affiliated with them as a licensed Broker/Investment Advisor with not much success. Have you heard of Wells being a player in this field, and having a fixed product?

Thanks
 
I came across your thread on CV line of credit lending facilities. I have a client who has an exisiting line of credit with Valley National Bank. His previous insurance broker had told him that Wells Fargo Bank had a fixed line of credit product available. I inquired high and low within Wells Fargo a few months back while I was affiliated with them as a licensed Broker/Investment Advisor with not much success. Have you heard of Wells being a player in this field, and having a fixed product?

Thanks

PM sent...thank you...
 
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