Policy Loan

A policy loan is a loan taken from the insurance carrier using your policy's cash value as collateral. You are not withdrawing your cash value — you are borrowing against it. The cash value remains in the policy and continues to grow as if the loan were never taken.

This is the foundational mechanism of whole life banking. Because the cash value grows uninterrupted (see Uninterrupted Compounding), the effective cost of a policy loan is reduced by the ongoing growth the cash value earns while collateralizing the loan.

Key characteristics:

• No credit check required — the loan is secured by your own policy
• No mandatory repayment schedule — the carrier adds unpaid interest to the loan balance
• The carrier charges a loan rate (specified in your policy contract)
• Outstanding loan balances reduce the net death benefit

In Policy Stack, each policy loan is tracked as a separate record linked to a policy. You record the loan amount, the date taken, the carrier's loan rate, and update the balance periodically from your annual statement.

Related terms: Loan Balance, Capitalized Interest, Uninterrupted Compounding