Paying Back Rent: How We Earned 36% Interest

Paying rent is a part of most people’s lives. Paying back rent is something nobody does. It is the money most people say goodbye to without looking back. How many times have you heard people say, “I cannot afford rent” or “I have to pay rent?

But what if we told you that you could earn interest every time you paid rent?

You can do so with the system called infinite banking. When we first started infinite banking, our sole purpose was to get out of debt.

We earned 36% interest on rent payments through creativity and awareness of our spending.

In this article, we will show you how you can pay rent through our example and what we did to earn interest on rent payments. You can use this system for rent payments but also for other housing-related expenses, credit card fees, etc.

Table of Contents

    Being Introduced to Infinite Banking

    The diagram showing how infinite banking works
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    A light bulb clicked as we became more aware of our spending, studied Nelson Nash’s work, and were diligent about the three rules.

    We thought, “Oh my gosh, we can make money off every single transaction we make.” Even though we started exploring options on how to pay off credit card debt first, we saw the full potential of this system.

    It can help you with any financial hardship, not just rent payments. It is even more efficient when you start with a clean slate and have no debt to pay at all.

    Mindset Shift

    When we realized that, we became super aware of our spending, housing costs, and all other expenses so that, as every dollar was leaving us, we were trying to figure out how to get it back in a boomerang effect.

    We wondered how we could make ourselves the most expensive bill.

    When you’re the one who’s making all the money, everyone else is getting paid but you.

    To change that, you make yourself a bill and pay yourself money. We decided we wanted to be the biggest expense in our budget. But how could we do that? We needed payment plans to make this work.

    Step 1: Get a Whole-Life Insurance Policy

    Whole life insurance policy with the paper family above it
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    We decided to test Infinite Banking before we even set out to pay rent with it, and for that, we needed a whole life insurance policy.

    We bought a $10,000 policy designed for maximum cash value growth.

    In the first year, $5,466 was available immediately because we had paid an annual premium. At that point, we asked ourselves, “What do we want to accomplish with this insurance policy?” 

    “How do we want to use infinite banking to improve our financial situation?”

    Why Whole-Life Insurance?

    Whole life insurance has a cash value feature that lets you save money over time. The guaranteed growth of cash will help you save more and more money and take out bigger personal loans that you will use at first if you have trouble paying overdue bills, other housing costs, or an emergency expense.

    Later, you will direct money towards real estate investment in your local community or perhaps even buy a property abroad, just as we did:

    This will serve as your asset, earning you even more money over time. But a whole life insurance policy is a start.

    Step 2: Pay Off Credit Card Debt

    Credit Card with Debt written and erased over it.
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    With our very first premium, we got a personal loan. We received the money in our personal account.

    Fun fact:

    You can take personal loans against your insurance policy’s cash value when you have whole life insurance with all the premiums paid. This allows you to utilize your money to pay rent, utility bills, or any other investment while keeping the cash value intact.

    What exactly did we do?

    We took that money and paid off our credit card debts, which included minimum payments with interest:

    • Chase Southwest: $50
    • BB&T: $53
    • Wells Fargo: $94
    • Amazon card: $105

    We used infinite banking to recapture the principal and interest for ourselves. By adding up the minimum payments, we found that we were paying $302 a month to those credit card companies.

    Opening a Segregated Account

    We then redirected those funds to our segregated account, which is a separate bank account. Our goal was to keep our payments to ourselves and our everyday expenses separate.

    Now we have $302 a month going into our segregated account. As a result, we became hyper-aware of our spending.

    When you become aware of your spending, you start to see exactly where your money is going—and what spending may not necessarily be the best thing for you.

    You see where your money is going toward your wants instead of your needs. We recognized that, so we started putting more money into our segregated account just because we became more aware.

    Step 3: Another Policy for Rent Payments

    A calendar showing the date for paying back rent
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    In doing this for ourselves, we realized we had additional funds available. As a result, we obtained a second policy for Darius.

    There was a huge difference, though. We decided to add an additional $4,000 PUA, or cash value.

    We were able to do that because of Darius’s age and health, which gave him a good rating to add funds to the policy. That’s called getting up to your MEC, or modified endowment contract, limit.

    Because we added the $4,000 to the policy, the immediate cash value jumped to $9,136.

    The interesting thing is that Darius still had a $10,000 policy premium for the next four years. We started to ask ourselves what we would do with the $9,000.

    What was the biggest expense we had? And how could we make paying ourselves our biggest expense?

    Remember, our segregated account is where we pay ourselves. That’s the money going back to us.

    Step 4: Paying Rent

    A person showing an eviction notice to someone who didn't pay rent.
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    Once we took care of our debit cards, we focused on rent payments. At no point did we want to enroll in the emergency rental assistance program but rather deal with this by ourselves.

    Still, government programs such as this one could be useful for some, so let’s see briefly what they are:

    What is Emergency Rental Assistance?

    Emergency rental assistance aims to help low-income families pay their utilities and rent. The program is designed by the US Department of the Treasury to help families in need by sending money to states, U.S. territories, local governments, and Indian tribes.

    Emergency rental assistance programs such as this one are usually designed by a state or local government to provide financial assistance during economic instability.

    Pay Rent Upfront and Ask For Discount

    We made ourselves the biggest expense when we wanted to cover rent. First, we looked at different opportunities to see what we were able to negotiate because we had cash available.

    We were able to negotiate an 11-month lease for $1,400 a month with the leasing office. Next, we asked them if we could get a discount if we paid in cash.

    We were told, “If you pay in full, we’ll give you $2,500 in credit.

    Instead of owing $15,400 to the leasing office, we only owed $12,900. That meant we had to use infinite banking to start recapturing this principal and crediting it back to ourselves.

    Communicate with your landlord

    If you have to pay your rent, and you have a landlord instead of a leasing office, talk to your landlord directly and see if you can get any discounts if you pay your rent upfront. Some property owners want security too and will be glad to help you.

    You may get rejected, but it is always worth asking if you can pay in advance and finish your financial obligations for the next 6 months to a year.

    Dipping Into Our Segregated Account

    In Darius’s policy, we knew that we had $9,136. In our separate account, we were getting back $302 a month from our credit cards and adding more money as we went along.

    We had more than $5,000 available in our segregated accounts.

    We took $3,764 from our segregated account and transferred it to our personal account, which is the account from which we wrote the check to the leasing office for future rent payments: 11 months in our case.

    Step 5: Paying Rent to Ourselves

    A person looking at the mirror paying themselves money.
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    We technically had no obligation to the leasing home now that our rent had been paid.

    We only had to recapture the money by paying back to ourselves, including the principal and interest.

    How did we do it?

    Our monthly payment was $1,400. If we wanted to make it less than that, we could have because we had room to do so. We could make that decision. We chose to stick with the sum we would have paid anyway and started paying it back to ourselves in our segregated account.

    For the next 11 months, we paid $1,400 into our segregated account, for a total of $15,400 that we had available in our segregated account just from paying ourselves back.

    We now had additional funds because we were still paying $302 from our credit cards into our segregated account. We could just use some of those funds to pay our rent.

    When it’s all said and done, we wrote a check to the leasing office for $12,900, but we maintained a payment back to our segregated account for $1,400 a month for 11 months. That’s a total 36.9% rate of return because, even though we got a $2,500 credit, what do people typically do with credit?

    They just don’t pay back their rent. Instead, we chose to continue with a monthly payment, and you can pay your rent the same way. And since we also paid ourselves, we had cash in our account.

    Takeaways from Using the Infinite Banking System

    Infinite banking (or lifestyle banking) is using the loans you borrow from the insurance company against the cash value of your insurance policy to do things you would do anyway.

    We were going to pay $1,400 a month on our rent anyway. We just chose to redirect it exactly where we were going to put those funds. And that resulted in us earning 36.9% interest in less than a year.

    Unlimited Options

    When it comes to using the concept of infinite banking, your options are, well, infinite.

    This is just one thing we decided to do with the money sitting in our segregated account. We often get questions from our clients, such as, “What do I do with the money in my segregated account?” This is one option. Of course, every situation and every person is different, and you will need to do this by yourself.