Loan Against LIC Policy

What is a Loan Against LIC Policies?

LIC policyholders can avail of loans against their LIC policy after it has acquired a surrender amount. The loan can be taken against this policy’s surrender value. The surrender value is the amount of money policyholders will get if they decide to discontinue the plan before maturity. A loan against an LIC policy allows policyholders to borrow up to 90% of their policy’s surrender value, offering a quick, secured source of funds for emergencies without terminating coverage.

Eligibility Criteria for Taking Loan Against LIC Policy

If you are planning to taking loan against your LIC policy, always make sure you meet the below conditions:

• The applicant should be at least 18 years old at the time of applying for the loan.

• The LIC policy must be active and should not be in lapsed status.

• Loans are usually available on eligible plans such as endowment plans or ULIPs.

• The sanctioned loan amount can be up to 90% of the policy’s surrender value.

Here is a list of some of the LIC policies that are eligible to be used as collateral for taking a loan against LIC policy:

• LIC Jeevan Labh

• LIC Single-Premium Endowment Plan

• LIC New Jeevan Anand

• LIC New Endowment Plan

• LIC Jeevan Rakshak

• LIC Limited Premium Endowment Plan

• LIC Jeevan Lakshya

How Much Can You Borrow?

The amount of loan depends on the surrender value of your policy. Lenders calculate the LTV (Loan-to-value) ratio based on this surrender value.

Key Details to Look for While Applying Loan on LIC Policy

Loan Amount: You can borrow up to 90% of the surrender value for active policies and up to 80-85% for paid-up policies.

Repayment: The loan must be repaid with interest, which is payable semi-annually. LIC may deduct unpaid principal or interest from the policy benefits.

Interest Rate: The interest rate is declared annually by LIC and typically starts at 9%.

Minimum Tenure: LIC loan can only be availed after the policy has been active for at least six months.

How to Apply for Loan Against LIC Policy?

LIC of India offers two processes for taking a loan against LIC policy. Take a look:

Offline Process:

Step 1: Visit an LIC Branch: Locate the nearest LIC branch and request a loan application form.

Step 2: Fill and Submit Forms: Complete the form and attach all required documents.

Step 3: Verification: The branch will verify the details and process the application.

Step 4: Loan Approval: Once approved, the loan amount is credited to your account within 3-5 days.

Online Process:

LIC provides a seamless online loan application service for registered users:

Step 1: Log in to LIC’s Customer Portal:

Go to LIC’s official website. Under the "Online Services" tab, click on "Online Loan." Log in with your User ID and password or register for "Premier Services."

Step 2: Submit Your Loan Request:

Select the policy against which you want the loan. Enter details such as the loan amount, repayment options, and tenure. Upload the required documents and submit the application.

Step 3: Bank Account Linking:

Provide bank account details for direct credit of the loan amount.

What are the Documents Required for Getting A Loan Against LIC Policy?

Here’s a checklist of documents required for the loan application:

• Loan application forms (as per the policy type).

• Original policy bond.

• Assignment deed in favor of LIC.

• Valid ID proof, address proof, and income proof.

• NEFT mandate/bank account details.

Types of LIC Policies Eligible for Loans

LIC has a variety of different insurance plans based on the needs of the customer such as providing life cover, helping a customer in saving, planning their retirement and even providing a solution in case of child education. Some of these plans are:

• LIC Term Insurance Plans

• LIC Whole Life Plans

• LIC Endowment plans

• LIC Money-back policies

• LIC Pension Plans

• LIC ULIP Plans (Unit Linked Insurance Plans)

Although not every type of LIC plan can be used as a loan security. As a rule, only traditional endowment policies and ULIPs can be loaned against.

Since term plans offer only life cover without investment value, they are not eligible for a loan as they do not generate a surrender value. So, if you have a ULIP or an endowment plan, you can take a loan against it without any effect on the benefits of your policy.

How to Repay Your Loan on LIC Policy?

LIC of India offers various online methods to pay the loan against LIC policy, such as:

Pay Direct

• No login required.

• Select "Loan Repayment" or "Loan Interest Payment" from the drop-down menu.

• Fill in the customer validation and loan particulars fields.

• Agree to the terms and make the payment.

Pay Through Customer Portal

• Log in to the LIC portal.

• Choose "Loan Repayment" or "Loan Interest Payment."

• Make the payment securely online.

LIC Policy Loan Interest Rate and Repayment Process

The interest on loans against LIC policies are much lower than most personal loans. It generally ranges between 8% and 12% per annum, depending on the policy terms and LIC guidelines.

The repayment process for a LIC policy loan is flexible. Policyholders are allowed to:

• Pay the interest regularly and repay the principal amount later

• Repay both principal and interest together as a lump sum

For those opting for loan on LIC policy online, timely interest payment is important. Unpaid interest may be deducted from the policy benefits or surrender value. In extreme cases, the policy may lapse if the outstanding amount exceeds the surrender value.

What are the Benefits of Availing a Loan From LIC?

Here are the reasons why should you opt for a loan against LIC policy:

• Lower Interest Rates: A loan against LIC policy usually has a lower interest rate than an unsecured personal loan, which means repayment becomes more economical.

• Quick Loan Approval: If you meet the eligibility criteria, the loan against LIC process is usually completed quickly with the loan amount being disbursed at a faster pace.

• Easy Online Facility: You can not only apply for a loan on LIC policy online but also can repay the loan amount through LIC's digital services.

• Policy Surrender Is Not Required: Taking a loan against LIC policy enables policyholders to keep on getting the insurance benefits, besides facilitating the fulfilment of the immediate financial requirements.

• Repayment in a Flexible Manner: With LIC, you get several different repayment options. One can either pay the interest at regular intervals only or can even pay off the entire loan amount later on.

Wrapping It Up

Taking a loan against an LIC policy is a smart way to meet immediate financial needs without disrupting your long-term financial goals. Whether you prefer visiting a branch or utilizing LIC’s digital platform, the process is streamlined and customer-friendly. By following the steps and meeting the eligibility requirements, you can easily avail yourself of a loan from LIC.

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