Gone are the days when insurance was purchased just as a protective cover. Nowadays, people have become wiser about their money and so look to get the most out of their investments, in every department possible. And while many still believe that insurance should not be used as an investment, others disagree. From investments and tax savings to securing loans, insurance plans are used for a number of purposes. Have you ever considered taking a loan against your insurance plan? Well, if you are speculating the concept, then you will be happy to know that there are a number of benefits associated with it. Read on to know more.
Insurance companies as well as most leading Indian banks provide you with a loan against your insurance policy. To avail the loan, you have to use the insurance policy as the collateral. It therefore becomes a secured loan. All policies, apart from term insurance policies, can be used to secure a loan. In other words, a plan that has a maturity benefit can act as your collateral. To get a loan, you must:
Loan against insurance – The Pros
There are many advantages of taking a loan against an insurance policy. They are:
Loan against insurance – The Cons
There are some disadvantages of taking a loan against your insurance policy as well. They are:
Both, a personal loan and a loan against an insurance policy, can bail you out of a sudden financial crunch. There are however some parameters to consider when choosing an insurance loan over a personal loan. Like mentioned above, a loan against your insurance policy is a secured loan and so you end up paying lesser interested and saving more money. Perhaps you will be able to borrow more from a personal loan since the insurance loan amount will be decided by the cash value of your plan, but then your whole credit score will be put on the line, something that is not touched while taking a loan against your insurance policy.
So as we can see from the points mentioned above, there are some very good advantages of taking a loan against your insurance plan. There are some disadvantages too and so you must consider each and every point before you seek a loan against your insurance policy.
You may also like to read : How to Get Loan Against Life Insurance