The first step of most financial preparation processes is debt reduction. It makes a lot of sense when you learn that the average American household has over $130 thousand in debt. Auto loans, mortgages, student loans, and credit card debt can pile up and make it seem as if there is no way to get a leg up.
Swimming in debt keeps you in a helpless place depending on banks and creditors. You can throw as much extra money as possible at each debt you have. That method will get your loans paid off early and lower the amount of interest you pay. However, it isn’t helping you build personal wealth. It is giving the bank what they want while leaving you without money to build interest or use in an emergency.
Infinite Banking Addresses Debt Reduction in a New Way
The simplest way to repay debt is to pay the minimum payments each month. To go one step further, pay more than the minimum payment on all debts. Some financial advisors help clients by suggesting they pay extra to one debt while paying the minimum on the others to quickly eliminate debts one at a time.
These methods get debt paid off. They even minimize interest paid to creditors. That is the best most Americans know to hope for. But wait, we have another option. A way to grow private wealth while paying off debts.
Pay into Your Own Account to Become Debt-free and Build Personal Wealth
Once you’re making enough to begin paying more than the minimum payments toward your debt, open a new account. Put everything that you would be paying toward the debt into the new account instead. Doing so can get your debts paid off, protect you from foreclosure, give you a financial safety net, and build your personal wealth.
Once you build enough money and interest in your personal account to pay off one of your debts, take out a new loan. Stay with us, this is going to make sense! Borrow from the bank against the money you have saved. Use the new loan to pay off the debt you have saved for.
Using a loan to pay off the actual debt allows the money you saved to stay in your personal account and build interest. The money you were paying as the minimum payment toward your debt will now go to quickly pay off the bank loan while your car or house—whatever you paid off—is now officially safe from foreclosure.
Protection from foreclosure
The bank has given you a loan in exchange for ownership of your property. They are kind enough to let you live in the home or drive the car that they own, but it is not yours. When you work hard to pay extra toward your loans each month, it makes you vulnerable to foreclosure or repossession.
If you reach a tight spot and miss payments for a few months, the bank is not likely to give you a break for paying extra every month before that. They’re going to consider the fact that you’ve paid off ¾ of the loan, and now they have the opportunity to have that money along with the car or house itself.
By putting your extra money into a personal account until you have the full amount, you give yourself the upper hand. The lending institution is only getting the minimum from you until the day you hand them the repayment in full. Your money is in your possession until you can trade it for having a car or house in your possession.
Financial safety net
When you pay into a debt, the money is no longer accessible. You can pay over the minimum every month and then lose your job or have an emergency, and that money is not going to be given back. Unfortunately, emergencies happen. It won’t feel good to dip into the debt payment account, but if it is absolutely necessary, it is going to feel really great to have access to it.
Personal wealth builder
The money you are saving is going to go toward debt reduction, yes. But, by putting it into your personal account, you can use it to build interest. It’s almost as if you get to use the bank’s money to pay money just because you are delaying giving it to the bank. It is important to leave the money, untouched, for as long as possible.
Meet with Us to Make a Plan
Contact us at Alpha Omega Wealth to make a debt reduction plan. Infinite banking can be an unfamiliar approach to financial planning. Let us explain how it works and why we are dedicated to helping you learn and build private wealth.