Cash Value Line of Credit, Loan, Etc. Programs
- Thread starter WMG
- Start date
- 10,318
As far as I know most any bank will take permanent life Cash Value as collateral on a Loan.
Why in the world a person would want to do that is beyond me.... just take the Loan directly from the policy (unless they want just a % of the loan as collateral & you dont have enough CV for the whole loan).
Why in the world a person would want to do that is beyond me.... just take the Loan directly from the policy (unless they want just a % of the loan as collateral & you dont have enough CV for the whole loan).
- Thread starter
- #3
Yes, I know almost any bank will take permanent/whole life insurance cash value as collateral (via a collateral assignment form). What I was asking was about any of the current bank programs. Why in the world? Why someone might do that -- they can borrow a very high percentage of the cash value, they can borrow at a much lower rate, they can leave the policy and cash value in tact, and in the case of a line of credit, they can use it when needed.
- 10,318
Im not aware of any of the "programs" geared specifically for life insurance cash values.
What is a "much lower rate"?? Because that is the only real possible advantage if the policy is with a decent carrier. (imo)
I will be the first to admit that I am no expert on personal loans or lines of credit. But from most of what I have seen a personal loan goes for around 5%-8% these days at best. Perhaps it is less with collateral... idk. But that is the same as most quality life policies charge these days...
And most life policies will let you loan out up to 75%-85% of the CV. Even 90% once you are old enough and the policy is old enough.
And of course you can use the life insurance CV whenever you need it too, just like a line of credit.
Are these programs providing lower rates than the normal personal loan for someone with good credit?
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- #5
There are banks that have "programs" specifically geared toward cash value lending. The ones I've seen are for whole life only and for policies issued by mutual companies. The LTV is usually around 90% to 95%, and the rates I've seen are between 3.5% and 4% for a line of credit; while borrowing from a whole life policy is usually substantially higher than that.
The line of credit feature is that you get a checkbook and write a check when you want. Aside from being a better rate, it's easier than borrowing out of the policy.
I think they are very favorable and very easy.
Is anyone familiar with non-line of credit type lending? Any banks known or have a program for that? Thanks.
- 10,318
That is a good rate and could create the possibility of arbitrage if the policy was far enough along and fully overfunded (I know that is not the point).
So if no collateral assignment, how does the bank secure the loan? Restrictive Endorsement? Ownership until loan is paid back?
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- #7
It is a collateral assignment, but that's all. Policy ownership, everything else stays as is, in tact.
I just heard of one -- 4.4% borrow rate, up to 92% of cash value, as a line of credit. One page application, approval in 24 hours or so, no fees, and you get a checkbook. I do not know the details and haven't see anything in writing, but I am waiting for it.
yelchevelle
New Member
- 14
Ohio National currently loans clients money against the cash value in their WL policies at 4.4%. It is a variable rate, but I am not sure if or when they will adjust it. Agents with a lot more experience than me, correct me if I am wrong, but they can only raise or lower the rate during a certain time of the year. It's not like it adjusts on a monthly basis.
- Thread starter
- #9
I don't know if Ohio National's initial rate is 4.4%...or if that's the rate after Year X or whatever. I'll have to check. Thanks.
The various bank programs appear to be better though -- a lower rate, and again, a checkbook, so you can use it moment needed. In any whole life policy the loan rate -- and the subsequent raise or decline -- obviously is contractually stated. I've never seen a WL policy with a variable rate that can adjust monthly.
Thanks again.
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Also, I am not as concerned about the rate being variable, either with a policy loan or a cash value line of credit loan.
I was looking to see if other producers were aware of banks that offered a program (either line of credit, or traditional type loan). I think this can be a very valuable tool for our clients.
Thanks again.
- 140
I believe 4.4% is correct for ONL currently. Their prestige max % is lower if you are 65 or older. I think it's 100 basis points lower with a minimum of 4 %.
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