Called many different names, including the perpetual wealth code, cashflow banking, and the money multiplier, infinite banking involves borrowing against yourself using a participating whole life insurance policy.
To go more in-depth, whole life insurance has a cash surrender value, AKA a cash value. This value is the amount of money that the insurance company makes available to you if you cancel the policy. With participating whole life insurance policies, your cash value goes up every time the company pays dividends.
Insurance companies let you use your policy as collateral and borrow from your cash value. This means that you’re borrowing your own money from yourself!
Your bank basically consists of the premium payments by you + the dividends paid by the life insurance company + the guaranteed interest rate. As a policy owner, you can borrow against yourself and become your very own bank.
As with all things in life, infinite banking has its pros and cons. Before putting money anywhere, it’s important to research exactly how it will affect you.