How Soon Can I Take A Loan From A Policy Designed For Infinite Banking?
Updated September 2026 · by John “Hutch” Hutchinson, ChFC®, CLU®, AEP®
If I start over-funding a whole life policy to be my private banking engine, when can I actually start using it for purchases? This video walks through an actual whole life illustration to show how much cash value is accessible in year one, year two and year five — and why the policy gets more efficient the longer you hold it.
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The two-pocket setup
How much is accessible in year one
Where the policy breaks even
When you can actually use it
Two Pockets: Where Your Safe Money Actually Sits
Anyone who went through the original Banking Truths three-part video course will remember the “Pants” portion of the second video. Picture two pockets. In one pocket is a whole life policy. In the other is your traditional banking mechanism — checking, savings, CDs, money market, whatever you happen to use.
Most of my clients do keep a decent amount saved up in reserves, purely for liquidity, control and safety. That’s a reasonable thing to want. The problem is what they trade away for it. They aren’t getting much interest credited to that money, and whatever interest they do get is taxed as ordinary income. On top of that, if they’re supporting a family, they’re usually paying something in the way of term insurance that builds no equity and has no growth at all.
Take some of that liquidity-and-safety money and move it from one pocket into the other — into a vehicle that has historically been very safe and can be structured to be very liquid — and what you’ve built instead is a nice compounding engine. You do have to commit to it for at least five years.
What you get on the other side of that commitment: over time you’ll probably find you get a much better rate of return, there won’t be any tax due on the growth or the distributions as long as you keep the policy in force, and you’ll need less term insurance — or none at all, depending on how big a banking policy you set up.
What An Actual Illustration Gives You In Year One
So let’s take that hypothetical model and put it against a real whole life illustration structured to do exactly this.
This one is for a 45-year-old man, run on the 2015 dividend scale. Dividends are not guaranteed — though this company has paid one for well over 100 years, as have all the companies we recommend. Dividends are largely tied to interest rates, and they were historically very low when this was run, so there’s a good chance they go up in the future.
There are really only two columns worth focusing on: total net outlay, which is your premium, and total year-end cash value.
He puts in thirty-five thousand dollars. Don’t get attached to the dollar amount — focus on the percentage. By the end of the year he has twenty-seven thousand dollars of cash value. That’s over 78 percent, available by the end of Year 1.
Something I bring up whenever a client has significant money sitting in savings: when was the last time you tapped 75 percent of that savings account? The answer is usually never. They keep something in reserves.
Year two: seventy thousand dollars has gone in, and there’s access to just over fifty-six thousand. That’s over 81 percent.
Where The Policy Breaks Even — And What You Bought
By year five, one hundred seventy-five thousand dollars has gone in, and there’s almost one hundred seventy-five thousand sitting right there in cash value. That’s the break-even point.
The part I think is important to notice is that you have a sufficient amount of liquidity out of the gate. Not total liquidity. But when I ask clients what they’re actually doing with their current savings account, they rarely need total liquidity anyway.
And let’s not forget that by agreeing not to have total access to these funds in the early years, you get two things back for your money. The first is a substantially better mechanism to grow your money going forward. The second is one no savings account will offer you: if you had somewhere between thirty-five and one hundred seventy-five thousand dollars in there and you died, your family would be paid a tax-free death benefit many multiples of that.
Why The Policy Gets More Efficient Every Year
Start at that break-even year and work out what kind of output you get on your inputs. Round up and call the cash value 174,811, then add the thirty-five thousand dollars of premium going in. That’s 209,811 of input.
Multiply that by 1.044 — basically saying we get 4.4 percent — and you’d expect 219,042. The illustration shows 219,062. The 4.4 percent figure comes in smaller than what’s actually there. And I don’t know any banking mechanism in this environment that’s going to give you 4.4 percent — never mind one that says, “You know, I have a special deal with the government, because we take care of widows and orphans, where you don’t get taxed on the growth of your money.”
Now go all the way down to the last row, because this policy gets better and better every year. Take 743,549 of cash value plus the thirty-five thousand dollars of premium — which, by the way, you don’t need to pay at that point. You could stop paying premiums. But if you have a mechanism that does this, why would you want to stop?
That says you should have 778,549, and the illustration shows 819 thousand. Multiply the input by 1.052, simulating 5.2 percent, and that figure is still smaller than what’s actually in the column.
A friend of mine explained the reason the policy gets more efficient better than I can. It’s like a jet flying from Los Angeles to New York. Taking off it’s full of fuel, so it isn’t nearly as efficient as it is later on, somewhere over Pennsylvania. A lot of the fuel has burned off, so the plane has gotten more efficient. The same thing is happening inside this policy: the mortality charges are burning off, and you’re getting mostly growth.
So When Can You Start Using The Money?
Bring it back full circle to the original question. Just like you could take the money out of the traditional-banking pocket at any time, you can also utilize the funds in your cash surrender column. Access is somewhat restricted early on, but that restriction is fairly nominal compared to what you’re probably going to need if you’re indeed starting one of these policies — and you can withdraw everything in that column at any time, for any reason.
That said, you’re going to see in future videos that there are advantages to using the loan feature — to borrowing against the fund and keeping it compounding.
The simple reason: if you have a mechanism that compounds steadily and safely at a very nice clip with no taxation going on, and you borrow against it and then pay the loan back, you don’t lose your place in line on that curve. You can keep using it again and again, rather than killing the goose that will continue to lay golden eggs.
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John “Hutch” Hutchinson has no affiliation or association with The Infinite Banking Concept®, The Infinite Banking Institute, or Nelson Nash, nor his book Becoming Your Own Banker – Unlocking the Infinite Banking Concept; nor with Bank on Yourself, Pamela Yellen, or her book The Bank on Yourself Revolution. “The Infinite Banking Concept®” is a registered trademark of Infinite Banking Concepts Inc. “Bank On Yourself®” is a registered trademark of Hayward-Yellen 100 Limited Partnership.