How to Secure a Loan Against Your LIC Policy: Eligibility, Interest Rates, and Calculations

Introduction

Life Insurance Corporation of India (LIC) is a trusted name in financial products, offering security and guaranteed returns. By taking a loan against your LIC policy, you can access urgent funds without liquidating your assets. This blog will guide you through the process, covering eligibility, interest rates, and calculations.

What is a Loan Against LIC Policy?

A loan against an LIC policy allows policyholders to borrow money using their insurance policy as collateral. The amount you can borrow is based on the policy's surrender value, typically ranging from 70-90%.

Eligibility for LIC Loans

• Type of Policy: Only endowment and whole life policies are eligible; term policies are not.
• Surrender Value: Loans can be up to 90% of the policy's surrender value.
• Premium Payments: Ensure your policy premiums are up to date to qualify for the loan.

Interest Rates on LIC Loans

Interest rates on loans against LIC policies are generally lower than unsecured loans, typically ranging from 9% to 12% per annum.

How is the Interest Calculated?

Interest is compounded annually. Although you don't need to pay monthly, the total interest accrues over time, making it cost-effective to pay off the loan quickly.

Loan Amount Calculation: How Much Can You Borrow?

The loan amount depends on the surrender value of your LIC policy, which is the amount paid if you cancel the policy before maturity.

Steps to Apply for a Loan Against LIC Policy

• Choose a Platform: Apply through the Credit Sea platform or directly at an LIC branch.
• Submit Required Documents: Provide identity proof, address proof, and your policy bond.
• Loan Processing: Processing usually takes a few days, with the amount transferred directly to your bank account upon approval.

Benefits of Taking a Loan Against LIC Policy

• No Credit Score Dependency: The loan is secured by the policy, minimizing the impact of your credit score.
• Flexible Repayment Terms: Repay at your convenience without fixed EMIs.
• Quick Disbursal: Loans against LIC policies have fast approval and disbursal times.

Factors to Consider Before Taking a Loan on LIC Policy

• Compound Interest: Be mindful of the accumulating interest over time.
• Policy Lapse Risk: Ensure the loan amount does not exceed the surrender value to maintain your life cover.

Conclusion

A loan against your LIC policy is a convenient option for accessing funds without liquidating your assets. With Credit Sea, you can enjoy competitive interest rates, flexible repayment options, and a hassle-free application process.