Why Loan against LIC policy is a great financial instrument?

A life insurance policy is designed to provide financial assistance in case of any unfortunate event of life such as death or partial/permanent disability. Policyholders are required to pay regular premiums for the given tenure and the amount gets fixed until the policy maturity. But, time changes, and so does the policy norms as well.

Earlier, when a person buys an insurance policy, the money gets parked for a fixed period of tenure, but, today it has become easier to get access to the funds in case of any emergency. Yes, policyholders can raise funds whenever needed through loan against LIC policy. You can avail loan up to 90% of the surrender value of the policy at the time of loan application.

Features of loan against policy:

1. Loan on surrender value – Policyholders can avail secured loan, subject to the surrender value of the policy. Apart from the surrender value, the loan quantum is also dependent on credit score and income class. Moreover, policy provider doesn’t approve a loan amount higher than the surrender value.
2. Easy processing – As the policy provider company already has your credentials, the loan application is processed instantly. On the other hand, if you prefer opting for a loan from different lender, then the process might be lengthy and would involve a thorough paperwork to process the loan request.
3. Comparative interest rates – Rate of interest for loan against LIC policy is quite low as compared to other types of loans and finances. Therefore, borrower doesn’t have to worry about paying higher interest during the entire tenure.
4. Flexible payment – Generally, most lenders provide the equated monthly instalment schedule for the repayment of the borrowed sum, but LIC policy loan have flexible repayment schedule where the borrower can opt for either to pay only interest or both principal and interest in a fixed or uneven instalment schedule. 

Conditions for loan against insurance policy:

1. Loan can be availed only after making payment for at least 3 premiums 

2. Loan can be availed for up to 85% to 90% of the surrender value or paid up policies

3. Policies that acquire surrender value after few years and if the policy is surrendered within this period, then no loan facility is extended to such policyholders as nothing is payable to the insurance company. 

4. LIC insurance policy is treated as the collateral in such loans

5. Loan against LIC policy interest rate is typically calculated on a half-yearly basis, i.e., for every 6 month. 

6. By serving the notice of 3 months, lender can request for full loan repayment along with the computed interest

7. In case of default payment, the policy will be cancelled and the lender will proceed to settle the outstanding loan amount.

For more details, log on to https://www.applykaroo.com/loans.