Categorized | Investing

Why the Bank Loves You!

Love is such a strong word. It makes me think of bright red and blue fields of flowers, where you can run around and dream of the ones you love. And I wouldn’t be surprised if this is exactly what bank owners are doing every time you finance a new purchase.

The average American credit card has an APR of 14.67 percent. The average auto loan has an average of 7-9 percent. Now that is something for Mr. Banker to smile about. Unless you have read MLR’s advice on how to avoid credit card costs, then Mr. Banker will be sad.

This means that in your lifetime, you could be giving hundreds of thousands of dollars right over to the bank for purchases like your car, mortgage, appliances, television sets, microwaves, food, fashion, and anything you put on a credit card.

On top of this, you probably have a savings account at a bank with some money in it. If you do, then guess what? You are borrowing YOUR OWN MONEY AND PAYING INTEREST ON IT. Sound ridiculous? It should.

So, the question arises, how can we redirect this money back to our circle of wealth?15 Dec 2003 --- Stack of Money --- Image by © Royalty-Free/Corbis

The answer is by Becoming Your Own Bank.

MLR’s Note: Before you get too far into the post, I was not too familiar with this idea until getting this guest post. I was excited about seeing a view that I am not familiar with. It isn’t an idea that is too out there, it is found on and has a good discussion on QueerCents (multiple dissenting views).

I’m going to run you through a few different scenarios of how a potential car purchase can happen. One scenario will be what you’re used to, and one will be slightly different.

Borrowing from the Bank

So let’s do some math. We will assume that I buy a car for $30,000 at a 6 percent interest rate for 5 years. Assuming I keep the car for the 5 years, I would end up paying $4,799 in financing over the life of the loan. This means I would pay $34,799 in total for the car.

Now, some people would say, “Alright, so I come out with $4,799 dollars less than when I started. Not a big deal.” Well we still have to take the value of the asset at the end of 5 years. The average car loses 50%-70% of its value in the first 5 years, so now your vehicle is worth, let’s say for ease, $15,000.

So you paid $34,799 for an asset that is now worth $15,000. You end up in the red with -$19,799.

Now I know the common response is, “well what are you going to do, that’s just life?” However, the ultimate problem here stems back to why the bank loves you. You treat them better than you treat yourself.

When you owe the bank money, you pay them back on time, you pay them interest, and you make sure they are happy with you. It’s time to start valuing your own money the same way by using the Infinite Banking or You Be the Bank concept.

Let’s take a look.

Borrowing from Yourself

In order to use the You Be the Bank concept, you must first capitalize the banking system.

Once you have capitalized, you then take a loan from your banking system for the vehicle, cost $30,000. Now, you set yourself up on a finance plan (called an amortization schedule) and pay yourself the interest at 6% interest. Now at the end of 5 years what do you end up with?

You now have the principle AND interest back in your banking system. A grand total of $34,799 is now in your bank.

But that isn’t all. You also have an asset worth $15,000. So in the end you come out, on a balance sheet, with $49,799 in total assets, for something that you would normally do anyways, purchase a car.

Now add in all the credit cards and other financing purchases you make and you can see some of the major benefits. And this doesn’t change anything you would normally do, you begin to recapture wealth by just financing your own purchases.

By getting ahead, capitalizing your own banking system, and then treating your money just like you would treat the banks money, you get the velocity of money on your side.

Risk Involved

And we can see how powerful this can be. Normally, a financial advisor will come to you and take your savings and try to get you a higher return. But when you put your money in a volatile market you also put that money at risk.

This is where the shift happens with Becoming Your Own Bank. By redirecting the 5-15 percent, or more, that you are paying in financing charges, back to your own circle of wealth, you can grow wealth much more efficiently and more importantly WITHOUT RISK.

Dividend Paying Whole Life Insurance Policy

There are many different financial vehicles that can be used to setup your own banking system. However, the vehicle we recommend is a dividend paying whole life insurance policy.

This where many people will stop and wonder if life insurance is a good place to store their money, because they have been told their whole lives that whole life insurance is a bad purchase. And before you jump to conclusions let me give you a few facts.

If you do some research, you will find that large banks have some very heavy dollars stored in similar accounts. According to, Wells Fargo has 19 billion dollars stored in these types of insurance policies.

There are a few reasons for this. Life insurance policies grow tax deferred, they are tax free–if treated correctly–they have tax advantages, they are post tax dollars, they are liquid, they give you control of your money, they have guaranteed returns, and on top of all that you get the added death benefit.

Start the Blueprints for Your Bank

Everything that was said above is what makes life insurance policies such a powerful vehicle for your banking system.

All in all it’s about getting ahead. Whether you just pay cash for your purchases, or you setup your own tax advantaged banking system, redirecting money back into your circle of wealth can have a huge impact on your future, your retirement, and the generations that follow you.

Get to know the author!

Dan Thompson is a 25+ year financial expert and the author of, “Discovering Hidden Treasures.” His new book, “The Banking Effect,” has just been released and can be found here.

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14 Comments For This Post

  1. Rick Says:

    This is a very interesting way to use life insurance. I think i’ve heard of this before. Don’t banks and corporations place huge amounts of money in policies similar to the ones mentioned in this post? I guess i never realized that it could be used on a personal level.


    MyLifeROI Reply:


    Yeah, banks do use money like this. I’m not 100% sure about the specifics, but I know it is done!

    I would need to research this a lot more before implementing it for myself, but interesting nonetheless!


  2. fatih Says:

    I like this article. thank you for the information. all banks ara earn much money all over the world.


  3. martin770 Says:

    Borrowing From Yourself: Great propaganda, but it doesn’t even make sense.

    First you have to have $30k. And if you have it already, then just spend it on the car as cash. At the end of the transaction you have $0 + a $30k asset.

    Instead of paying yourself + interest, just plan to only put 30k back into the back over the next 5 years. So what do you have at the end of 5 years? An asset worth $15k + $30k that you put back into savings instead of car payments + $2,399 of the bank’s money that you earned as 3% interest.

    In your scenario, you don’t gain any wealth because the “interest” you earn comes out of your own pocket. No matter how much “interest you charge yourself” it’s a net gain of zero unless you are also investing that money.

    In that case, it doesn’t even matter what percentage you are charging yourself and boils down to simple investing. The more money you put in the bank to invest, the more money you will have at the end. The $4,799 isn’t money that you gained, it’s just money that you did not spend.


  4. Jeter Says:

    lol at banks loving people. It’s probably because they have so much debt from the consumers !!
    Jeter´s last [type] ..Credit Card Help


  5. Josh Says:

    @martin770, That’s the problem though right there. While your money is being “saved up” in a bank you are losing out on all the opportunity your money could be making when you aren’t using it. Utilizing this system will put your money in a place where it can do work always.


  6. Pam Says:

    Banks are businesses that want to make a profit, just like any other type of business. It’s up to you as the consumer to bank smart. Shop around and find the bank that offers you what you need. Make sure that you understand the fees and how they work. Most banks provide ways for you to avoid fees. It’s up to you as the consumer to take ownership and make the bank work for you instead of the other way around.
    Pam´s last [type] ..Top Money Saving Apps


  7. Keith Says:

    Bank is running fractional model. Basically, one dollar in, 20 dollar out to make money for them. The more money you loan from bank, the more money they make.
    Keith´s last [type] ..Boulder Philharmonic


  8. Monica Says:

    It is so true that we are living our life mostly on credit cards… yet we cant resist it !


  9. Rhona@Best Way To Make Money Says:

    How would one set up a tax advantaged banking system exactly?


  10. Mike Edwards Says:

    I try to pay cash for everything. I love the idea of being my own bank. If I can’t afford something, I don’t need it!


  11. Buzzbanking Says:

    BuzzBanking is the only rewards program that allows you to earn points on your survey days purchases and earn additional points by telling your friends!


  12. Więcej Says:

    That’s so cool.
    Więcej´s last [type] ..Jak wybrać dobrego laptopa do gier?


  13. Suresh @ Best Investments Says:

    I have taken several loans from ICICI and Citi bank to give handloans to my friends and relatives. I used to pay n between and pay pre-closure charges. Banks were after me to give personal loans. I never cared why banks were so much in love with me. Later I released that I was paying high interest charges and pre-closure charges. By the end of it, I was making some loss…. Suresh…
    Suresh @ Best Investments´s last [type] ..Top 5 Tax Saving Mutual funds (ELSS) in India to invest for 2014


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I'm MLR. After graduating from college debt free, I decided to write a blog encouraging people to adapt responsible and sensible personal finance rules.

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