Need quick funds but don’t want to dip into your savings or sell assets? Here's a smart alternative a loan against life insurance policy. It’s a lesser-known yet highly effective way to raise emergency funds without giving up your long-term financial protection. By simply pledging your existing life insurance policy, you can unlock a world of secure loans with flexible borrowing options. And the best part? You still retain your policy benefits while getting the liquidity you need, right when you need it.
Let’s walk you through how it works and why it might just be the most underrated borrowing option out there.
What is a loan against life insurance policy?
When you opt for a loan against insurance, you're essentially unlocking the hidden value in your life insurance policy the surrender value. This value represents the amount your insurer would pay if you chose to terminate your policy early. Instead of selling valuable assets or turning to high-interest unsecured loans, you can borrow against this surrender value.
This form of borrowing is considered a secure loan, as your policy acts as the collateral. It typically involves minimal paperwork, quicker processing, and lower interest rates. And since your policy is pledged with the lender or insurance company, there's usually no requirement to offer any additional security. In short, you are turning your long-term protection plan into a short-term liquidity solution without sacrificing either.
Why break your investments when your life cover can help you borrow smartly? Get liquidity without letting go of your long-term plans. Apply now
Benefits of availing a loan against insurance policy
Here’s why thousands of individuals choose this borrowing method when they need funds urgently, but don’t want to compromise their financial stability:
- Easy eligibility: Since your life insurance policy is the main criteria, lenders don’t dig too deep into your income or credit profile. Salaried or self-employed your policy’s surrender value does most of the talking.
- Lower interest rates: These secure loans come with significantly lower interest rates than unsecured loans, helping you manage repayments more easily.
- Higher loan amounts: Based on the type of policy and its surrender value, you may be eligible to borrow up to 90% of that value making it ideal for larger financial requirements.
- Flexible repayment tenure: Repayment terms often range from a few months to up to 96 months, offering you enough room to structure EMIs as per your income.
- No end-use restrictions: The funds can be used however you choose be it for a family emergency, child’s education, medical expenses, or expanding your business.
- Collateral-free in the conventional sense: There's no need to pledge physical assets like gold or property. Your insurance policy is enough to secure the loan.
Need Rs. 10 lakh or more but don’t want to risk your assets? Tap into your policy’s value and borrow on your terms. Apply now
What are the eligibility criteria for taking a loan against a life insurance policy?
Thinking about using your life insurance policy to raise quick funds? The good news is that eligibility criteria for a loan against life insurance policy are usually straightforward and inclusive. While specific requirements can vary depending on the lender or insurer, most follow these broad conditions:
- Age: You must be at least 18 years of age at the time of application. Some lenders are even open to granting loans up to the age of 90, depending on the policy and repayment plan.
- Nationality: You should be an Indian resident. This applies to both salaried and self-employed individuals across the country.
- Occupation: Whether you draw a monthly salary or run your own business, your occupation is rarely a barrier. Since the loan is secured by your insurance policy, lenders are typically more relaxed about income proof or employment history.
- Policy tenure: Your life insurance policy must have completed a minimum duration usually three premium-paying years and must have accrued a surrender value. Without this value, your policy may not qualify as security.
- Quick tip: ULIPs and term plans without surrender value typically qualify. Double-check your policy before applying. For a complete list, refer to the eligibility and documentation guide.
