Loan Against LIC Policy– In addition to life insurance plans, Life Insurance Corporation (LIC) offers personal loans in exchange for its insurance policies.
The borrower can use these loans to cover immediate expenses such as vacation, graduation, medical emergencies, weddings, renovations, and so on.
If the borrower can not repay the loan, LIC reserves the right to withhold the contract.
List Of Policies Offering Loans Against LIC Policy
- Jeevan Pragati
- Jeevan Labh
- Single-Premium Endowment Plan
- New endowment plan
- New Jeevan Anand
- Jeevan Rakshak
- Limited Premium Endowment Plan
- Jeevan Lakshya
Also Read: LIC Term Insurance 1 Crore
Key Features Loan Against LIC Policy
- The loan is only available to LIC endowment policyholders.
- The amount of the loan is an advance on the present value of the plan.
- The insurance policy is held by the LIC as collateral. As a result, the insurance company may suspend the policy if the applicant does not repay the loan.
- All LIC insurance policies do not have this feature. Therefore, it is important to choose the right policy so that the claimant can avail the loan without inconvenience.
- The interest rate on the loan usually varies between 9 and 11%.
- The loan amount that can be borrowed depends on the present value of the LIC policy. As a rule, the loan amount reaches 90% of the value of the policy. For paid policies, this amount is 85%.
- If the debt exceeds the repurchase value of the policy, LIC reserves the right to terminate the policy.
- If the insurance policy expires prior to full repayment of the loan, LIC reserves the right to deduct the required amount before the policyholder receives the proceeds of the plan.
Also Read: LIC India Premium Calculator
Benefits Of Loan Against LIC Policy
- Lower interest rate: The interest rate offered by LIC in relation to the LIC policy is comparatively lower than that of other banks. LIC applies an interest rate of 9% to 11% on a loan. In addition, the loan interest must be paid twice a year.
- Loan Amount: The maximum loan amount that can be used depends on the repurchase value of the policy.
- No Credit Needed: If your credit rating is low or zero, you can still use this loan against the LIC directive, which does not verify the applicant’s creditworthiness prior to offering a loan.
- Fast Processing: The loan is processed quickly because there are fewer formalities to complete and the amount is easily paid into the applicant’s account.
- No processing fee or change of prepayment: unlike other banks, LIC does not charge any processing fee or money for early repayment of the loan. In this way, an applicant saves a lot of money.
- Flexible Payment: Most loans allow for a refund in EMI. The lending policy compared to LIC offers repayment flexibility and therefore allows the applicant to make interest or principal and interest payments or instalment payments.
Also Read: LIC Policy Maturity Calculator
Eligibility Criteria For Loan
- The applicant must be a resident in India.
- He or she should follow the LIC directive.
- The policy must be a personal policy with cash value. He should have paid at least 3 years of insurance premium in full.
- He should be at least 18 years old.
Documents Required For Loan Against LIC Policy
- Original policy document
- Proof of Identity: Aadhaar Card, Voter Card, Passport
- Proof of residence: Aadhaar card, electoral pass, driver’s license, the electric bill
- Proof of income: payroll statements, bank statement
- Deed of assignment
LIC Policy Loan – Terms and Conditions
- The minimum term of a loan agreement in relation to the LIC policy is 6 months.
- For long-term loans, the applicant must pay 6 EMI before he can repay the loan in advance.
- If the policyholder dies, the interest is calculated until his death.
- If the contract expires, the amount may be used at maturity to repay the remaining capital
- Only LIC policyholders with employee benefits are eligible for this loan.
Also Read: LIC Jeevan Anand Maturity Calculator
Loan Against LIC Policy Repayment
LIC contract loans have a minimum term of six months and the maximum term depends on the term of the insurance plan. You pay interest for at least 6 months, even if you plan to settle the loan within 6 months. You can do the following to repay the loan:
- Pay interest along with the principal.
- Pay interest for a few years and pay back the principal if you have a cash surplus.
- Pay Only interest and principal payments can be settled with the claim amount at maturity.
Frequently Asked Questions
Answer: The repurchase value is the amount the policyholder receives when he gives up the policy.
This is the basis of the loan compared to the LIC policy, as the amount of loan that can be used depends directly on the current repurchase value of the insurance policy.
LIC requires the loan amount to be equal to or less than the surrender value, but it must not exceed the present value.
Answer: A bond is a legal document that must be signed by the policyholder to use the loan against his policy.
It contains all the relevant clauses and conditions of the insurance policy and the loan concluded. The document is issued on behalf of LIC and states that the rights to the certificate are hereby granted to LIC in exchange for the loan.
The certificate will be refunded to the applicant once he has repaid his loan.
Answer: The loan amount is the present value of the loan. The maximum loan amount that can be used is 90% of the present value. The maximum loan amount equals 85% of the repurchase value of a released policy.
Answer: The loan against the LIC policy offers low-interest rates. In addition, the interest on the loan amount must be paid every six months. The loan amount will be paid much faster as the policy of the PFR applicant is collateral. The amount of credit that can be used depends directly on the present value of the loan. In addition, candidates with bad credit can apply for such a loan.
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