Why Would You Pay Interest to Use Your Own Money?

If you have asked this question, you are not alone. It is one of the most common objections to the Infinite Banking Concept, and it makes complete sense on the surface. But the answer to this question is the single biggest reframe in understanding how Infinite Banking works.

Because the honest answer is: you are not using your own money.

Watch the 60-Second Explanation First

The Reframe That Changes Everything

Here is what Jayson Lowe, who has been practicing the Infinite Banking Concept since 2008, explains to every person who asks this question:

The moment you pay a premium, it is no longer your money. And cash value in a dividend-paying whole life policy is not money. It is the value of the contract at any given moment that the insurance company is willing to lend against. So, when you need capital, they lend you their money, using your policy as collateral, on demand, on your terms. And your cash value, which again is not money, continues growing daily in the background.

Read that again slowly, because it reframes everything:

Premium goes in — it is no longer your money
Cash value builds — it is not money, it is the value of a contract
You need capital — the insurance company lends you their money
Your policy is the collateral — not the source of funds
Your cash value keeps growing — because it was never touched

This is fundamentally different from withdrawing from a savings account, cashing in an RRSP, or borrowing from a 401(k), all of which interrupt your money’s growth.

Why Is There Interest at All?

Because you are borrowing money. Specifically, you are borrowing the insurance company’s money. The interest you pay is to them, not to yourself.

However, here is why the interest conversation is beside the point:

Your cash value is growing daily, guaranteed, regardless of the loan
The net effect of growth minus interest is often favorable compared to alternatives
You are in complete control of repayment — there is no schedule, no penalty, no bank breathing down your neck
The insurance company has no say in what you use the money for

Compare that to a bank loan: the bank’s money stops growing when you spend it. Here, the insurance company’s capital goes to work for you while your policy value keeps compounding uninterrupted.

How Is This Different from a Bank Loan?

This is a question searched heavily in both Canada and the US, and the comparison is worth making directly.

Feature	Policy Loan (IBC)	Bank Loan
Whose money are you borrowing?	Insurance company’s	Bank’s
Does your collateral keep growing?	Yes, daily	No
Credit check required?	No	Yes
Repayment schedule?	Your terms	Bank’s terms
Approval required?	No	Yes
Impact on your asset growth?	None	N/A

Do you want to understand how this fits into a broader financial strategy? Read Infinite Banking Concept Overview, or explore Borrowing Money From Life Insurance.

Ready to take control of your financial future?

Speak with an Ascendant Financial advisor to find out whether a policy loan structure fits your situation — and what borrowing on your own terms could look like.

See If You’re a Good Fit

Who Is Jayson Lowe?

Jayson Lowe has been practicing and teaching the Infinite Banking Concept since 2008. His Family Banking System (FBS)™ includes 77 dividend-paying whole life insurance policies and over $1.5 million in annual premium. He is the founder of Ascendant Financial, one of Canada’s most recognized authorities on IBC.

Frequently Asked Questions

Is the interest on a policy loan tax-deductible in Canada?

In some cases, yes — if the borrowed funds are used for business or investment purposes. This is a question best answered by a qualified tax advisor in your specific situation. Ascendant Financial can connect you with the right professionals.

Does the interest on a policy loan compound against you?

If a policy loan is not repaid, unpaid interest can be added to the loan balance. However, because your cash value is also growing daily, guaranteed, the policy is designed to remain in force even with an outstanding loan balance, provided it is properly structured.

Is a policy loan the same as a withdrawal?

No. A withdrawal reduces your cash value permanently. A policy loan does not touch your cash value at all; your policy value is simply used as collateral. This is a critical distinction.

Does Infinite Banking work the same way in Canada and the US?

Yes. Dividend-paying whole life insurance is available through major mutual insurance companies in both countries. The policy loan mechanics are the same. Ascendant Financial serves clients across both Canada and the United States.

The Bottom Line

The question “why would I pay interest to use my own money?” is a completely reasonable one. But once you understand that you are not using your own money — you are borrowing the insurance company’s money against your policy collateral — the entire conversation shifts.

You are not paying interest to yourself. You are paying a small cost to access capital on your own terms, while your policy’s value continues growing uninterrupted in the background.

That is a fundamentally different relationship with money.

Watch the free training at learnwithj.com.