Nomadic lord
Simply better.
Personally, I believe that borrowing against my life insurance policy is a better option than taking out a bank loan. This is because life insurance policies typically offer lower interest rates and more favorable terms than bank loans, making them a more affordable and manageable form of borrowing. In addition, borrowing against my life insurance policy can provide me with the money I need without requiring me to make separate monthly payments, which can be a helpful way to manage my finances plus it's not taxable and don't have a due date.
Cons
Reduced death benefit: Borrowing against a life insurance policy can reduce the overall value of the policy, including the death benefit that you leave behind for your beneficiaries in the event of your mortality.
Reduced potential for growth: Making early repayments or paying off the loan in full can reduce the potential for growth and accumulation of dividends, which can have a meaningful impact on the policy's overall value over the long-term.
Tax consequences: Depending on your specific circumstances, borrowing against a life insurance policy may have tax consequences when the loan is forgiven or when the policy matures.
Cons
Reduced death benefit: Borrowing against a life insurance policy can reduce the overall value of the policy, including the death benefit that you leave behind for your beneficiaries in the event of your mortality.
Reduced potential for growth: Making early repayments or paying off the loan in full can reduce the potential for growth and accumulation of dividends, which can have a meaningful impact on the policy's overall value over the long-term.
Tax consequences: Depending on your specific circumstances, borrowing against a life insurance policy may have tax consequences when the loan is forgiven or when the policy matures.
