Maximize Benefits While Preserving Capital

Once approved by both the insurance company and lender, the 3rd party lender will pay all or part of the life insurance premiums. The borrower may make regular payments (usually at least interest) to the lender. However, some more aggressive premium financed structures promote accruing interest in hopes that cash value will exceed the ballooning outstanding loan.
The borrower must be prepared to have sufficient liquid assets or marketable securities to post as collateral at any time there is a shortfall between policy cash values and the total amount borrowed. That said, life insurance policies, when designed properly, can often make up the majority of the required collateral.

At a later date, all the loaned money plus any accrued interest if applicable, must be repaid to the lender. The loan is paid back by the cash value in the life policy, by liquidating outside assets, or a combination of the two. If death occurs before plan maturity, then the loan is paid back with the death proceeds of the life policy, after all it is life insurance.