What Is Loan Against LIC Policy: Features, Benefits, Eligibility, Documents And How To Apply Online

A financial emergency can arise at any time. And, for certain types of loans, the borrowers need to pledge collateral. In case you do not have any assets to pledge but have a LIC policy, you can use it to get a loan. LIC provides credit facilities against an insurance policy that people can use to meet their financial needs. This article provides all the details regarding loans against LIC policy – its features and benefits, interest rates, eligibility criteria, documents required, how to apply online and loan repayment policy. Read on!

What is Loan Against LIC Policy?

A loan against LIC policy is a type of secured loan offered to the policyholders against the policy’s surrender value. While taking this loan, you have to deposit your life insurance policy as collateral. You can avail of this loan at low-interest rates to meet your financial requirements.

Features and Benefits of Loan against LIC Policy

Some of the features and benefits of borrowing a loan against LIC policy are as follows: 

• One of the most satisfying features of LIC is that it offers its policyholders up to 90% of the surrender value as their sum of loan. 
• There are various online platforms available from where you can apply for a loan against your life insurance policy.
• The loan amount is calculated on the surrender value of your policy. The sum of money you can take as a loan is subjected to the rules and guidelines of LIC. 
• If needed, you can take help from the LIC policy loan calculator to verify whether the loan amount is sufficient for you.
• The minimum time interval for loan repayment of LIC is 6 months.
• You can save loan processing time by applying for a LIC loan instead of going to a financial institution.
• The credit facility of life insurance policies is offered to sole proprietorships, firms, individuals, Hindu Undivided Families (HUFs), partnerships, etc. 
• The rate of interest for LIC policy is comparatively much lesser than a personal loan. LIC charges only a 10-12% interest rate for loans against the insurance policy.
• You can track your loan information through various available online and offline networks.

Interest Rates of Loan against LIC Policy

Other than the Life Insurance Corporation of India, some financial institutions provide loans against the life insurance policies of LIC. The rates of interest on this loan are as follows: 

Eligibility Criteria for a Loan against LIC Policy

Here are the eligibility criteria for a loan against LIC policy:

• The least possible age of the borrower must be 18 years.
• A borrower should possess a genuine LIC policy.
• A minimum of 3 years of LIC premium must be entirely paid. 
• Mostly, financial institutions offer this credit facility to the Indian populaces. 
• The loan against LIC policy should possess assured surrender value.

Documents Required for Taking a Loan on LIC Policy

You have to submit the following documents while taking a loan against life insurance policy: 

• The original document of the policy
• Properly filled application form besides passport-size photos
• Identity Proof of the borrower: PAN Card, Aadhaar Card, Voter ID Card, Passport
• Address Proof: Aadhaar Card, Electricity Bill, Voter ID card, Driving License
• Income Proof: Statement of Bank Account, Salary Slips
• Premium paid receipt

How to Apply for a Loan against LIC Policy Online?

Loan Repayment Policy

Usually, repayment of the loan can be made within six months or by the maturity period. But loans offered by LIC do not follow a similar principle. It provides no loan payment through the EMI system. Thus, borrowers find it easier to repay the loan. 

The policy includes: 

• Make the payment of the LIC loan interest with the principal amount online.
• Pay only the amount of interest while the principal amount can be settled on maturity.
• After paying a few years’ interest, repay the principal amount at the time you have sufficient funds. 

Final Word

Individuals facing problems due to any financial crisis can avail of a loan against LIC policy. It has various advantages like low-interest rates and a lower repayment burden. If you are in a financial crisis and need a loan, you may consider a loan against LIC policy. However, talk to a LIC agent to get all the detailed information. You must also check if you can repay the loan without added financial burden. 

FAQs on Loan Against LIC Policy

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