The Financing Modeler compares three ways to fund a purchase or asset: paying cash, borrowing from an external lender (Third Party Financing), and self-financing through your banking system (Honest Banker). It locks the same purchase across all three options so you can see the lifetime cost and system impact of each approach on equal terms.
This tool presents factual side-by-side comparisons. It does not indicate which option is better — that depends on your situation, your carrier, and your goals.
How to Use the Financing Modeler
- Navigate to Tools — click Tools in the sidebar, then select Financing Modeler
- Enter the purchase — amount, useful life, and whether this is a one-time or recurring purchase
- Configure Third Party Financing — interest rate, term in months, and any origination fees
- Configure Honest Banker — your carrier's loan rate, your planned repayment pace, and (optional) interest recaptured redirected to paid-up additions
- Review the three columns — total lifetime cost, monthly cash flow, and net system impact for each option
- Adjust inputs — change the recurrence, recapture, or external rate to explore different scenarios
What the Comparison Shows
Pay Cash
- Total cost — the purchase price; no interest paid to anyone
- System impact — capital exits the system permanently and stops compounding
- Modeled condition — the purchase is funded immediately without a financing balance
Third Party Financing
- Monthly payment — fixed obligation to the outside lender
- Total interest — interest paid to a third party over the loan term
- System impact — none on cash value (it's not collateralized), but the monthly outflow leaves your system without recapture
- Modeled condition — the purchase uses an external financing contract while policy values remain separate
Honest Banker
- Monthly cash flow — your planned repayment pace (you set this; the carrier does not enforce a schedule)
- Total loan interest — interest paid to your carrier; on direct-recognition policies, partially offset by dividend adjustments
- Interest recaptured — the spread between what you'd have paid a third-party lender and what you actually pay your carrier can be redirected into paid-up additions
- Cash value impact — your cash value remains on the carrier's books and continues compounding (uninterrupted compounding)
- Modeled condition — a policy loan and user-entered repayment pace fund the purchase
Numerical Example
$50,000 purchase, 5-year horizon:
| | Pay Cash | Third Party Financing (7.5%) | Honest Banker (5.0%) | |---|---|---|---| | Out-of-pocket today | $50,000 | $0 | $0 | | Monthly payment | $0 | $1,001 (required) | $900 (planned) | | Total interest | $0 | $10,060 | $4,000 | | CV compounding | Stops on $50K | Uninterrupted | Uninterrupted | | Interest recaptured | None | None | $6,060 (spread) | | Payment flexibility | N/A | Fixed schedule | You set the pace |
(Illustrative — actual results depend on your carrier's loan rate, the external rate you qualify for, and how much of the spread you redirect.)
Key Concepts
Uninterrupted compounding: With Honest Banker, your carrier uses your cash value as collateral but does not withdraw it. Your cash value continues earning dividends for the entire loan period.
Interest recaptured: The interest you don't pay to a third party can be redirected into paid-up additions on your policy. Modeled over decades, recaptured interest can compound into a significant share of the system's growth.
Carrier capacity: The Financing Modeler assumes your policy can absorb additional paid-up addition contributions each cycle. Actual capacity depends on your contract's death-benefit corridor — verify with your carrier before relying on recapture math.
Flexibility: Honest Banker has no required payment schedule. Third Party Financing has a contractual obligation. Pay Cash has neither but exits capital from the system.
The tool quantifies the lifetime cost difference. The flexibility, control, and recapture factors are yours to weigh.