Loan Against LIC Policy: Interest Rate, Eligibility & Benefits

A loan against LIC policy lets you unlock funds using your policy’s surrender value without losing life cover. Compare rates, eligibility, and apply easily.
APPLY NOW
Get Loan Against Insurance Policy!
APPLY NOW
3 mins read
09-March-2026

Life insurance is not just about protecting your family’s future. If you hold a ULIP or endowment policy, it can also help you meet urgent financial needs without breaking your long-term goals. With a loan against your insurance policy, you can borrow money by using your policy as security, all while continuing to enjoy the benefits it offers. Whether it is an emergency, a business need, or education costs tapping into the surrender value of your insurance policy can give you the liquidity you need, without hassle.


A loan against LIC policy is one of the easiest ways to access quick funds without selling your long-term investments. If you hold a ULIP or endowment policy, you can use its surrender value as collateral and get instant liquidity.

Instead of breaking your insurance policy, you can use a loan against insurance policy to:

  • Borrow funds up to a certain percentage of the surrender value
  • Continue enjoying life cover benefits
  • Pay lower interest compared to personal loans

Need quick funds without breaking your investments? Get a loan against your ULIP or endowment plan with easy terms. Apply now

What is a loan against LIC policy?

A loan against LIC policy is a secured loan where you borrow money by pledging your life insurance policy (ULIP or endowment policies) as collateral.

Key highlights:

  • Loan is offered against surrender value of the policy
  • Interest rates are lower than unsecured loans
  • Your life cover continues during the loan tenure
  • No need to surrender or discontinue your policy
  • You can borrow up to 80% of the surrender value and repay as per your convenience.

How loan against LIC policy works?

A loan against LIC policy works by using your policy’s surrender value as collateral. Here’s a step-by-step breakdown:

  • Policy eligibility check: Only ULIP or endowment policies with surrender value qualify
  • Loan amount calculation: You can get up to 80% of surrender value
  • Policy lien creation: The lender marks a lien on your policy
  • Loan disbursement: Funds are credited quickly to your bank account
  • Interest payment: Interest is charged only on the used amount
  • Repayment: Flexible options: EMI, lump sum, or adjustment

If unpaid, the loan amount is deducted from maturity or death benefits.

Why let your insurance policy sit idle? Put your ULIP or endowment plan to work when you need it most. Apply online in minutes

Benefits of taking loan against LIC policy

To avail a loan against your LIC policy, you must meet certain criteria:

  • Quick access to money – Funds are usually disbursed faster than personal loans.
  • No need to surrender the policy – Your life cover remains active.
  • Lower interest rates – As the loan is secured, interest is often lower.
  • Flexible repayment – You can repay as a lump sum or in parts.
  • Credit score: No strict credit score requirement.
  • Documentation: Minimal paperwork

Knowing the ULIP advantages and disadvantages helps you decide if borrowing against your plan is the right financial move.


 

How to calculate loan amount on LIC policy 

When you apply for a loan against your LIC policy, the amount you can get depends mainly on the policy’s surrender value and the lender’s loan-to-value (LTV) ratio. The surrender value is the amount your policy has accumulated over time, and only policies with a valid surrender value are considered.

Formula to calculate loan amount:

Loan Amount = Surrender Value × LTV Ratio

For example, if your policy has a surrender value of Rs. 1,00,000 and the lender offers an LTV ratio of 80%, your eligible loan amount would be Rs. 80,000.

To understand your eligibility better, keep these key factors in mind:

  • Policy type: Traditional policies such as endowment plans are generally eligible if they have a surrender value.
  • Surrender value: The higher the surrender value, the higher the loan amount you may receive.
  • Policy age: Policies usually need to complete a minimum period, often around three years.
  • Premium status: All premiums should be paid and the policy should be active.
  • LTV ratio: The percentage of surrender value offered as a loan varies by lender and policy terms.

Understanding the loan eligibility against LIC policy rules is essential for policyholders looking to leverage their insurance as a financial asset.


 

Factors influencing loan against LIC policy

Several factors decide the loan amount and terms:

  • Surrender value – This is the biggest factor.
  • Loan-to-value ratio – Usually 80% of the surrender value.
  • Interest rate – May vary slightly depending on the lender.
  • Policy tenure – Longer-tenured policies may offer higher values.
  • Repayment options – Flexibility in repayment adds to convenience.


 

Risks of loan against LIC policy

As with any loan, there are a few things to watch out for:

  • Interest keeps adding up – If not repaid on time, interest can grow.
  • Loan cap – You cannot not borrow beyond your policy’s surrender value.
  • Policy benefits impact – If you do not repay, it may affect your death benefit payout.


 

How to avail a loan against LIC policy?

You can choose between two methods, both simple.

Online process

  1. Visit the LIC website and log in.
  2. Go to the ‘Policy Loan’ section.
  3. Choose the eligible policy (ULIP or endowment).
  4. View your eligible loan amount.
  5. Fill and submit the online form.
  6. On approval, funds are transferred to your bank.

Offline process

  1. Visit your nearest LIC branch.
  2. Fill in the loan application form.
  3. Submit your policy, ID proof, and other required documents.
  4. LIC will verify and process the application.
  5. On approval, funds are credited to your account.

Applying for LAIP through Bajaj Finserv? You can get fast, paperless approval on ULIP and endowment policy loans. Start now


 

Interest rate and loan amount 

The loan amount and interest rate for an LIC policy loan depend largely on the policy type and its surrender value. Since the policy itself acts as collateral, these loans are generally easier to access and priced lower than unsecured borrowing options. Here are the key points to know:

  • Loan amount: Typically up to 80% of the policy’s surrender value, depending on whether the policy is an endowment plan or a ULIP.
  • Interest rates: Rates are usually lower than unsecured loans and may be charged at a fixed or variable rate, based on lender terms.
  • Interest calculation: Interest accrues only on the outstanding loan amount, not on the sanctioned limit.
  • Repayment flexibility: You can repay interest periodically or allow it to accumulate and get adjusted against maturity or death benefits.
  • Impact on benefits: Any unpaid loan balance and interest are deducted from the final payout, reducing maturity or claim proceeds.

Types of LIC Policies Eligible for Loan

Not all LIC policies qualify for loans. Eligibility depends on whether the policy has built sufficient surrender value and meets lender-specific criteria.

Commonly eligible LIC policies include:

  • Endowment policies: Traditional savings-oriented policies that build surrender value over time and are widely accepted for loans.
  • ULIPs (Unit Linked Insurance Plans): Market-linked policies where loans are offered against the fund value, subject to minimum lock-in periods.
  • Paid-up policies: Policies that are no longer receiving premiums but continue to hold surrender value may also qualify.

Important exclusions:

  • Pure term insurance plans do not qualify, as they carry no surrender value.
  • Policies that have not completed the minimum premium-paying period are generally ineligible.

Loans against eligible policies issued by Life Insurance Corporation of India offer a convenient way to access funds without giving up long-term insurance protection.

What documents are required to avail loans against LIC policy?

Here is what you will need:

  • Filled loan application form
  • Original ULIP or endowment policy
  • Valid ID proof (Aadhaar, PAN, Passport)
  • Address proof
  • Cancelled cheque
  • Latest premium payment receipts

 

Loan against LIC policy vs other loan types

Below is the comparison between loan against LIC policy and other loan types

FeatureLIC policy loanOther loans
CollateralYes – ULIP/endowmentNo
Interest rateLowerHigher
Credit score neededNot mandatoryRequired
Loan amount basisBased on surrender valueBased on income
Repayment flexibilityHighModerate


LIC policy loan vs loan against securities

Compare insurance-based loans with those against shares or mutual funds to make an informed choice.

FeatureLIC policy loanLoan against securities
CollateralULIP or endowment policyShares, mutual funds
Interest rateLowerCan be variable
Loan amountUp to 80% of valueUp to 50%
Market riskNoneYes
Credit score neededNot requiredNot required


How to repay loans against LIC policy?

Explore easy repayment options, from instalments to lump sum or claim-based settlement.

  • EMIs – Pay back the loan in instalments.
  • Lump sum – Repay the entire amount any time before policy maturity.
  • Claim adjustment – If unpaid, the balance is deducted from the final maturity or death benefit.

Final thoughts

A loan against your ULIP or endowment policy is a smart way to unlock quick funds without disturbing your life cover. It’s cheaper than personal loans, and far more flexible. Just remember repaying on time protects your policy benefits. If you're looking for low-cost funds with minimal hassle, this is an option worth considering.

Have a ULIP or endowment plan? Do not let it sit idle. Get a loan of up to 80% of its surrender value today. Apply now

Bajaj Finserv app for all your financial needs and goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

GET THE APP

Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.
For customer support, call Personal Loan IVR: 7757 000 000

Frequently asked questions

Can I get a loan against my LIC policy?
Yes, you can get a loan against your LIC policy. The loan amount is typically a percentage of the policy's surrender value, allowing you to access funds without liquidating your policy.
Is taking a loan from LIC good?
Taking a loan from LIC can be beneficial due to lower interest rates compared to unsecured loans. Additionally, the loan process is straightforward, and you continue to receive life cover benefits while the loan is active.
Can I take a loan from a paid up LIC policy?
Yes, you can take a loan from a paid-up LIC policy. A paid-up policy with sufficient surrender value can be used as collateral for the loan, providing you with access to funds based on that value.
How much loan can I get from my LIC policy?

You can get up to 90% of the surrender value of your LIC policy (85% for paid-up policies). The exact amount depends on your policy type, premiums paid, and duration. Check your policy brochure or contact LIC for accurate loan eligibility.

What is the interest rate for LIC policy loan?

The interest rate on LIC policy loans typically ranges between 9% and 10%. This rate is charged on the loan amount and is usually compounded semi-annually. It’s lower than many unsecured loans as the policy itself acts as collateral.

Can I close my LIC and get money-back?

Yes, you can surrender your LIC policy to receive the surrender value, provided premiums have been paid for at least three years. However, you may lose out on full benefits or bonuses if surrendered early. Evaluate alternatives like a loan before closing.

How much money will I get after 3 years of LIC policy?

After paying premiums for three years, your LIC policy gains surrender value. The amount depends on the type of policy, premiums paid, and bonuses accrued. You can check your surrender value in your policy conditions or contact LIC.

Does LIC loan reflect in CIBIL?

No, loans taken directly from LIC against policies typically do not reflect in your CIBIL score, as they are not reported to credit bureaus. However, if the loan is from a bank against a LIC policy, it may impact your credit report.

Which LIC policies are eligible for a loan?

A loan is generally available against LIC policies that acquire a surrender value, such as endowment and whole life plans. Pure term insurance policies are not eligible since they do not carry any cash or surrender value.

What happens if I fail to repay the loan on my LIC policy?

If you fail to repay, the outstanding loan and accrued interest continue to accumulate. Over time, this amount is deducted from the policy’s maturity or death benefit. In extreme cases, the policy may lapse if dues exceed value.

How long does it take to get a loan against LIC policy?

A loan against an LIC policy is usually processed quickly, often within a few working days. Timelines depend on document submission, policy verification, and internal checks by Life Insurance Corporation of India or the lender.

What documents are required for a loan against LIC policy?

You generally need the original policy document, completed loan application form, identity and address proof, bank details, and a cancelled cheque. Additional documents may be requested depending on policy type and lender requirements.

Does taking a loan reduce my policy’s maturity benefit?

Yes, if the loan or accumulated interest remains unpaid, it is deducted from the maturity or death benefit. If repaid in full before maturity, the policy’s benefits remain largely unaffected.

How does loan against LIC policy differ from personal loan?

A loan against an LIC policy is secured against surrender value, offering lower interest rates and easier approval. A personal loan is unsecured, usually costlier, credit-score dependent, and requires fixed EMIs from the start.

Show More Show Less