Loan Against LIC Policy

It is easier to get a loans against your LIC policy as they come at cheaper interest rates. However, they are only good for Personal Loan needs as there are restrictions in terms of the amount that can be borrowed even as a member of the policy. Note that for submission of loans only the endowment policies are applicable.

How much can be Borrowed on your LIC Policy?

The Cash Value is the term that needs to be noted, which is also known as the Surrender Value of the policy as well. Prior to applying for the loan it is essential to know the exact cash value of your policy as, in the case that it is very less it is useless applying for the personal finance option unless it is a huge amount.

The Surrender or Cash Value

The cash or surrender value is basically the amount payable to the policyholder in the case he or she decides to discontinue the policy and encash the same from LIC. This amount is only payable after three full years premiums have been paid to their LIC policy. Also, in case it is a participating policy, the Bonus amount is automatically attached to the amount as per rules of LIC. The surrendering of an LIC is not a good idea considering that the value is always considerably low.

Eligibility Criteria for Availing the Loan against your LIC Policy

Here are some of the main eligibility criteria’s, if you wish to avail a loan against LIC policy:

He or she must be an Indian citizen or residing in India.
He or she should own an LIC policy.
The applicant also must have paid three years of complete premiums before applying for the loan.
He or she should be at least 18 years of age.
The maximum loan amount available under the policy is 90% of the Surrender Value of the policy. In Case of paid up policies 85% of the surrender value and cash value of bonus is the maximum that can be loaned in.

Features and Benefits of Loan on LIC Policy

The following are the features, including the benefits of availing a loan against your LIC policy:

The loan against your LIC policy is an advance made against the cash value or surrender value of the policy.
The advance is always less than the case value.
Most of the insurers approve 90% of the cash value of the policy.
In case a loan is given, the policy is absolutely assigned and held by Life Insurance Corporation of India as security for repayment of the loan.
You have to pay the interest specified in the loan, which in the case of an LIC policy is generally 9%.
If the individual fails to pay the interest by the due date, the amount will be added to the principle and the interest will be calculated again.
If the total amount of debt is more than the surrender value, LIC takes the leverage of terminating the policy.
If the policy matures prior completion of loan repayment, LIC also has the rights to deduct the loan amount from the maturity amount.