Things to know about a loan against LIC policy | Fusion - WeRIndia

Things to know about a loan against LIC policy

Things to know about a loan against LIC policy

Collateral is required to get a loan easily. However, many borrowers do not have properties or fixed deposits to keep them as collateral.

In such cases, a LIC policy can help them get a loan, as many banks accept it as collateral.

Policyholders can avail of a loan against their LIC policy from the Life Insurance Corporation of India (LIC).

In addition, banks like Axis bank, Kotak Mahindra Bank etc., offer loans against the LIC policy. Borrowers can approach NBFCs like Bajaj Finserv.

Here are some important points to note while opting for a loan against an insurance policy:

  • Though many banks accept LIC policies and offer loans against them, some of them accept insurance policies from other private insurers as well.
  • The borrower must be 18 years old or more, and the policy should be valid.
  • The policyholder must have paid the premium in full for at least three years.
  • Borrowers should note that the maximum loan amount is up to 90% of the surrender value while applying for a loan. It is 85% in the case of paid-up policies. They should check with banks before opting for a loan.
  • The policy must have guaranteed surrender value. That means term plans are not eligible for this loan as they do not have a guaranteed surrender value.
  • In other words, only LIC endowment policyholders can avail of the loan facility.
  • Some of the LIC policies that can be accepted as collateral by banks are Jeevan Labh, Jeevan Pragati, Jeevan Rakshak, New Jeevan Anand, and Jeevan Lakshya.
  • The interest rate varies with each bank. LIC can terminate the policy if the loan amount exceeds the surrender value of the policy.
  • The minimum tenure of the loan is 6 months. Borrowers can prepay the loan only after paying 6 EMIs.
  • If the policy matures before the complete repayment of the loan, LIC will hand over the proceeds to the policyholder only after deducting a certain amount from these proceeds.

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