The Infinite Banking Concept (IBC):  The Basics

The Infinite Banking Concept (IBC) was first conceptualized by Nelson Nash in the year 1994.

The basic premise is that instead of taking out loans from banks and other lending and financing institutions, why not create your own personal “bank” where you can get a loan from, for whatever you need it for.

In the traditional banking system, when you take out a loan and starts paying your amortization, you will be paying the principal plus the interest.  Take note that the principal and the interest will not go back to you. Take note, also, that interest expense alone can go up to millions. [see previous post on housing loans]

In infinite banking, since you are the “bank” the principal and the interest will go back to you. You will be making all the money, instead of the banks making money on your money. You will be making the big profits that banks would have made!

Sounds, interesting?  You bet!

When I found out this concept, the way I looked at banking, lending and financing was totally overhauled. 

Do you know that we are paying an annual interest rate of forty-two percent (42%) on our credit cards?  If we are late in our monthly payments, the effective interest rate can go as high as 70%!

In the first quarter of this year alone, documents from the Bangko Sentral ng Pilipinas (BSP) showed that consumer loans on auto, house and credit cards reached P413 billion!

Can you picture now how big  is the interest income for the banks and the credit card companies?

By being our own “bank”, we can recapture the interest expense we are paying to banks and credit card companies, thereby increasing our net personal income by several, if not, hundreds of thousands of pesos.

How is this done?

Be a follower of this blog and you will know the answer. J