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Life Health > Life Insurance > Permanent Life Insurance

3 Types of Insurance-Backed Line of Credit Applicants

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What You Need to Know

  • Some life insurance policyholders who need cash borrow from the insurer.
  • Some sell the policies.
  • Some use the policies as loan collateral.

It’s no secret that financial professionals are talking to clients more and more about today’s fluctuating market and what that can mean for financial portfolios.

But as clients are becoming increasingly concerned about the future of their finances, compounding factors like interest rate hikes and a looming recession aren’t helping the situation.

As these things are making borrowing more expensive, consumers may be looking for alternative options to get fast access to liquidity.

One of these options could be an insurance-backed line of credit, or IBLOC, on clients’ whole life insurance policies that gives them up to 95% of the cash value of their eligible whole life insurance policy.

Clients often find an IBLOC a better lending option than others because of how resilient it is from outside forces; it’s not tied to securities, so it’s more protected from market volatility.

But what clients are primed for IBLOCs?

The following are the three types of applicants we see most frequently.

1. An applicant who is purchasing real estate.

The real estate market has become progressively competitive over the last year.

Homes across the U.S. are selling for more than the asking price, so speedy sales and full-cash offers are now the norm.

That said, the need for immediate liquidity for down payments has never been more important.

An IBLOC is a good solution to this issue by providing timely access to funds and helping eliminate the need for homebuyers to use their savings or emergency funds to cover expenses.

2. A person who needs to refinance other high-interest debt or pay a large or unexpected bill.

Between student loans, medical bills and other debt, consumers need options.

For one, credit card debt has jumped by 13% over the past year, with some of the highest interest rates of any kind of debt.

In fact, it’s likely that consumers are paying between double and triple the interest rates on credit cards that they do on most auto, student or home loans.

Because an IBLOC offers competitive interest rates, monthly payments become more manageable for borrowers.

3. A business owner with liquidity needs.

Managing a business in today’s landscape of rising interest rates, inflation, and an impending recession — coupled with ongoing staffing shortages — is not easy.

If a business owner needs liquidity because they are facing debt or looking for quick cash to expand their operations, it’s likely a good time to talk about a line of credit.

Financial professionals know that helping clients manage their finances and long-term goals is not easy, especially in today’s economic landscape. Considering alternative types of financial support like an IBLOC, however, helps clients get quick access to cash for personal or business needs.

Abdullah Rajput (Photo: The Bancorp Bank)Abdullah Rajput is director and IBLOC lead at The Bancorp Bank.





(Image: Shutterstock)


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