A policy loan is a loan taken against the cash value of your whole life policy. Understanding how policy loans work is central to tracking your banking system in Policy Stack.
For the full loan-and-draw lifecycle — how a draw works, capitalized interest, LTV, and the repay-and-redraw cycle — see How Policy Loans & Draws Work.
How Policy Loans Work
When you take a policy loan, your carrier lends you money using your cash value as collateral. Your cash value is not withdrawn — it remains in the policy, continuing to earn dividends and grow. This is one of the key distinctions of your banking system: the cash value experiences uninterrupted compounding even while a loan is outstanding.
Key Characteristics
- Your cash value stays intact — it continues to earn dividends and grow regardless of the loan