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I'm bringing this one back to life here! I was thinking this could be an excellent option if the client has a MEC, right?
Cash Value Line of Credit, Loan, Etc. Programs
- Thread starter WMG
- Start date
Nope, the collateral assignment is a reportable event to the IRS and current US tax law sees the assignment as a distribution from the policy.
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I missed this thread when it was originally going but I'll chime in now. I've done this a few times.
Not the easiest or generally the most economic option for middle income/asset folks but higher networth individuals and/or people with an existing relationship with a bank tend to do well. The policies I've written that have been assigned have loan rates at LIBOR or Prime + a pretty small spread that comes out lower than the minimum rates at most life insurers right now. There is an origination fee in most cases so that needs to be taken into account. As well as an amortized loan schedule that could be more costly than the simply interest aspect to a life insurance policy loan.
I've also been involved in a few situations where the assignment was used to pledge collateral for a loan to purchase some other property or equipment.
I should note that 100% of these have been loans originated for business related purposes. It's not the case that anyone has done it to access cash for personal spending purposes as far as I know (I can't say that I track what anyone is doing with the money so I suppose they could have spent it on personal expenses, but that doesn't appear to be the case).
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Bummer! I thought I might have found a loophole.
danerlavigne
Expert
I would definitely take a loan from a bank before taking a loan from your insurance policy. With a bank loan, you will be more motivated to pay it back as scheduled, because of the threat of them reporting to your credit. There are many people who take loans on their life insurance policies who never end up paying them back. With that being said, if you are talking about an indexed universal life policy you have had for 25 years and are now wanting to start taking money out as a retirement income source and that is what you designed the policy for, then I wouldn't mess with the bank.
I am aware of VNB, Fidelity, and Investors CSV Lines of Credit.
Any other banks out there with similar programs?
Anyone have experience Pros and Cons of the various banks above?
What other attractive premium financing programs are available? I have a client that is considering converting some term policies, but doesn't want to tie up his cash as he's putting up a major real-estate development now.
Any other banks out there with similar programs?
Anyone have experience Pros and Cons of the various banks above?
What other attractive premium financing programs are available? I have a client that is considering converting some term policies, but doesn't want to tie up his cash as he's putting up a major real-estate development now.
Typically, the loan directly from the insurance company is 5-8%. The LOC with the bank can be as low as prime rate, currently 4%.
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I can offer Cash Value Lines of Credit as low as prime rate, currently 4.00%. Let me know if I can help you or your clients.
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I can offer a Cash Value Line of Credit (CVLC) on the Cash Surrender Value of a Whole Life policy, with a rate as low as prime rate, currently 4.00%.
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I can get you a CVLC at up to 95% LTV, currently at prime rate. Let me know if you would be interested.
Thank you,
Marc Vernick
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I can offer Cash Value Lines of Credit as low as prime rate, currently 4.00%. Let me know if I can help you or your clients.
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I can offer a Cash Value Line of Credit (CVLC) on the Cash Surrender Value of a Whole Life policy, with a rate as low as prime rate, currently 4.00%.
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I can get you a CVLC at up to 95% LTV, currently at prime rate. Let me know if you would be interested.
Thank you,
Marc Vernick
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