---
title: The True Cost of Direct Recognition Policy Loans
description: Taking a policy loan under direct recognition may cost more than you think. Using a major carrier's dividend example, we break down how lost dividends and expense charges can push the true post-tax cost higher, and why borrowing from a third party like the Inclined Line of Credit (iLOC) may offer a more flexible, cost-effective alternative.
---

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# [The True Cost of Direct Recognition Policy Loans](https://www.inclined.com/blog/the-true-cost-of-direct-recognition-policy-loans)

 Written by [Alaina Paradise](https://www.inclined.com/blog/author/alaina-paradise) | Feb 27, 2026 5:25:19 PM

Under direct recognition, taking a policy loan will affect the annual dividend paid on a Whole Life Insurance policy. Therefore the true cost of a policy loan can be significantly different than the listed loan rate, and often much higher when accounting for tax implications, especially in scenarios where interest is accrued.

Borrowing from a third party using the cash value as collateral instead of taking a policy loan can be a less expensive, more flexible option.

[View full post](https://www.inclined.com/blog/the-true-cost-of-direct-recognition-policy-loans)

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