how billionaires pay back their loans?

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So, this is very specific. I tried to read up on how billionaires avoid paying income taxes and found that they take out giant loans instead of selling their assets to finance their lifestyle because these loans don’t count as income and won’t be taxed.

But how do they pay back those loans? The bank will eventually ask for their money back. And where do they get it if not by selling some of their assets which in turn would count as a taxable income?

Do they use the loaned money to invest and make more money and then pay back the loans or how does it work?

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>But how do they pay back those loans? The bank will eventually ask for their money back. And where do they get it if not by selling some of their assets which in turn would count as a taxable income?

They can take new loans (against the same assets) to pay off the old ones. Since their wealth usually grows faster than the interest they pay this can continue forever. Once loans get more expensive than taxes they will likely switch to selling assets though.

It’s a win-win situation. The billionaire can spend their wealth untaxed while also staying in control of their assets, and the bank gets interest payments at almost no risk.

My acquaintance worked in a bank at the “high-profile customer” division… Each worker has a few dedicated client to tend to every banking needs 24/7

When a billionare choses a bank, and they put their assets there, that means billions sitting there and the bank can work that money even if they not kicking back to the customer

That is just chumpchange for regular folks but if you are a billionaire that is a big lump of money just from interest alone

Usually the banks issue a no limit credit card for those customers, which they not necessarely have to pay back, they can aggree that part of the “estate management” the cards are automatically filled from the interest of the assets

The bank basically pays the customer to have their assets with them… What is a million a month when you can can have interest of 3 billion at 1% equal to 30 million

They do eventually pay back the loans by selling assets. But the interest and repayment amount is often tiny relative to the value increase in shares.

Say some wealthy person borrows $10m/year at 1% for 10 years. At the end of the decade, they owe back $110m or so in principal and interest. But maybe their shares have tripled in value in that time, so paying some interest and capital gains taxes still leaves then we’ll ahead financially. They may strategically wait for times when government lowers taxes for the wealthy and sell a chunk of assets then to take advantage of lower tax rates.

Big thing to remember here is that they aren’t taking lump sum loans, instead they are getting lines of credit. That means they are only paying interest on what they actually spend and because the loans are so incredibly overcollateralized (mean the amount borrowed is far far less than the value of the assets) banks are willing to only charge like 2% interest.

Like others have said as well, they don’t always have to pay regular interest payments like you or I would on a car loan or a mortgage. As long as the assets keep appreciating in value the bank is happy to roll the principal and interest owed over the next time that the line of credit is renewed (they have a time limit on them).

So when you hear people say “they take new loans to pay for the old” that’s what they are talking about”. The new LoC pays the interest and principal of the old.

Fun fact – the bank _does not_ ask for the money back. Such leveraged loans do not have repayment terms. As long as the underlying security is intact, and the interest payments are being made, you can keep the loaned money indefinitely. You can even pass on the debt as part of your estate.