Besides being one of the most sought out options, for life insurance for Indian citizens, Life Insurance Corporation policy allows you to get personal loans against it for meeting your immediate needs. A lot of people are not aware of this advantage because of the lack of publicity of this option from the 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.
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 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. However, it means that the loans that you can avail against this amount from LIC will also always be comparatively low.
Here are some of the main eligibility criteria’s, if you wish to avail a loan against LIC policy:
The rate of the interest applicable on the loan is 9% and the minimum period loan is given if for 6 months.
The following are the features, including the benefits of availing a loan against your LIC policy:
There are other options for availing personal finance, other than loan against your LIC policy:
The amount of loan sanctioned can be only till a maximum of 90% of the policys surrender value. The surrender value is achieved after payment of 3 years of premium in full, so the loan can be availed only after that.
The minimum time allowed for repayment is six months. Even if the principal is settled off within two or three months, the interest for the period of six months will have to be paid.
In case the policy matures or is claimed within the repayment period, interest will be charged only till the maturity or claim date, appropriate principal and interest will be deducted and the balance will be paid out to the policyholder or the nominee, as the case may be.
Yes, even if the interest on the first loan hasnt been paid, a second loan can be allowed from LIC, provided the policy is of an increasing cover type that increases annually. No reason needs to be offered for this loan as well.
The current rate of interest (as of December 2015) is 10% per annum which is the lowest that one can get in the market as far as personal loans are concerned. The interest is calculated semi-annually, so twice in a year.
There is no particular EMI structure and the principal can be paid in as less or as more amounts as possible. Lessening principal will effectively lessen the interest amount that needs to be paid.
No, as of yet, the facility can be availed only by physically visiting the branch where one has availed the policy and the loan from. Repayments also have to be done through physical visits.