Published Jun 30, 2025 4 Min Read

Need urgent funds but don’t want to break your investments? If you own a LIC policy with a decent track record of premium payments, you may not need to look far. A loan against your LIC policy offers a smart, quick, and secure way to raise funds, without selling off your assets or going through a lengthy approval process. This guide explains everything you need to know about interest rates, eligibility, repayment terms, and tools like the LIC loan calculator to help you make an informed decision.

Need funds without surrendering your insurance policy? Get a loan against your insurance policy with simple steps and competitive rates. Apply now



What is a loan against LIC policy? 

A loan against a LIC policy is a secured loan offered by LIC or authorised lenders, using your life insurance policy as collateral. This means the loan amount is given against the surrender value of your policy, and your policy continues to offer life cover as long as you pay the premiums and loan dues.

Key points to understand:

  • You must have a traditional policy (like endowment or whole life plans).
  • The policy must have completed at least 2–3 years of premium payments.
  • The loan can typically be up to 90% of the surrender value.
  • It is useful for short-term or emergency needs without affecting your long-term insurance plan.

 

 

Current interest rates for loans against LIC policies 

Interest rates on loans against LIC policies can vary based on whether you’re borrowing directly from LIC or through a financial institution. These rates are usually lower than unsecured personal loans since the insurance policy acts as security.

Here’s a general overview of current rates:

LenderInterest Rate (Approx.)Remarks
LIC of India9% – 10% p.a.For active, traditional LIC policies
Bajaj FinanceCompetitive, on requestOffered against ULIP or endowment policies
Banks & NBFCs (via partners)10% – 13% p.a.May vary based on credit profile

Want to access funds at competitive rates? Explore flexible loans against insurance policies. Apply in minutes

 

Eligibility criteria for availing a loan against LIC policy 

To apply for a loan against insurance policy, you must meet some basic criteria set by LIC or the lending institution. These include:

  • The policy must be a traditional plan (not term or annuity-based).
  • You must have paid premiums for at least 2 or 3 full years.
  • The policy must have a surrender value available.
  • The policy should be in your name, or you must be the legal nominee/assignee.
  • Some lenders may require you to assign the policy in their favour during the loan period.

 

 

How to apply for a loan against LIC policy: Step-by-step guide 

Applying for a loan against your LIC policy is quite straightforward, especially if the policy is already in force and has completed the minimum premium-paying period.

Here’s how you can do it:

  1. Check the surrender value of your LIC policy through your LIC agent, policy document, or online portal.
  2. Fill in the loan application form – either on the LIC website or the lender’s platform.
  3. Submit required documents such as ID proof, policy bond, and a cancelled cheque.
  4. Assign your policy to the lender by signing the required forms (done once).
  5. Get the loan disbursed, often within 24–48 hours* of approval.

 

 

Calculating your loan amount: Understanding surrender value 

The surrender value is the amount payable by LIC if you choose to terminate the policy before its maturity. This value depends on:

  • Number of years the premiums have been paid
  • Policy type (ULIP, endowment, etc.)
  • Bonus additions (if any)

Typically, you can get up to 90% of the surrender value as a loan. For example, if your policy’s surrender value is Rs. 2 lakh, you may get a loan of up to Rs. 1.7 to 1.8 lakh.

The more premiums you've paid, the higher your surrender value and in turn, the higher your eligible loan amount.

 

 

Loan against LIC policy calculator 

A LIC loan calculator or loan against LIC policy calculator helps you estimate how much you can borrow and what your interest payout might look like. It simplifies decision-making by showing:

  • Eligible loan amount based on surrender value
  • Applicable interest rate
  • Total interest payable

Monthly repayment schedule (if applicable)

 

 

Repayment options and tenure details

(When you take a loan against a LIC policy, repayment is flexible:

  • You can repay only the interest regularly and settle the principal later.
  • Or, you can choose to repay both interest and principal through EMIs.
  • Loan tenure usually ranges from 6 months to the remaining term of the policy.
  • If the loan is unpaid and the policy matures or is surrendered, the outstanding amount is deducted from the maturity/surrender value.

There’s usually no strict EMI structure unless you opt for a structured repayment plan via a private lender.

 

Advantages of taking a loan against your LIC policy

Here’s why this type of loan is considered safer and more cost-effective:

  • Quick disbursal with minimal documentation
  • Lower interest rates compared to unsecured loans
  • No credit score check required
  • You continue to enjoy insurance cover
  • Flexible repayment options
  • Helps during emergencies without affecting long-term investments

This makes it a reliable source of funding for urgent needs like medical expenses, education fees, or business capital.

 

 

Risks and considerations before availing the loan

While loans against LIC policies are secure, there are a few points to be aware of:

  • If premiums are not paid, the policy may lapse, affecting your loan.
  • Unpaid loan amounts are deducted from death or maturity benefits.
  • Not all policies are eligible—term plans and annuities are usually excluded.
  • Early surrender of the policy could result in a lower loan value or additional charges.

Always check the terms of your policy and speak to your insurer or lender before applying.

 

 

Comparing loan against LIC policy with other loan options

Here’s how loans against LIC policies stack up against other common loan types:

 

FeatureLIC policy loanPersonal loanLoan against FD
Collateral requiredYes (LIC policy)NoYes (Fixed Deposit)
Interest rate9% – 12%11% – 24%up to 2% p.a. over the underlying deposit rate
Credit score neededNoYesNo
Processing time24–48 hours2–5 days1–2 days
Impact on insuranceMinimal if repaid on timeNoneNone

 

 

 

Conclusion

A loan against your LIC policy can be a smart, secure, and cost-effective solution when you need funds quickly. With competitive interest rates, simple eligibility, and fast processing, it allows you to borrow without giving up your long-term life cover or investments. However, like any financial product, it’s important to understand the terms, use tools like the LIC loan calculator, and plan your repayments responsibly.

Need instant funds with complete peace of mind? Apply for a loan against insurance policy and get access to funds without compromising your life cover.

Frequently asked questions

What is the maximum loan amount I can avail against my LIC policy?

You can usually borrow up to 85–90% of the surrender value of your LIC policy. The exact amount depends on the policy type, premium payments made, and any applicable bonuses accumulated over time.

How is the interest calculated on a loan against an LIC policy?

Interest is charged on the outstanding loan amount, typically on a half-yearly or annual basis. The rate may vary depending on whether you borrow directly from LIC or through another lender. You can choose to pay just the interest or repay both interest and principal.

Can I apply for this loan online, and what is the process?

Yes, you can apply online through LIC or authorised lender portals. The process includes filling in the application, submitting policy details and KYC documents, assigning the policy to the lender, and receiving the approved amount—usually within 24–48 hours*.

What happens if I fail to repay the loan on time?

If you do not repay the loan, the outstanding amount and interest will be deducted from your policy’s maturity or death benefit. Continued non-payment may also lead to the policy being marked as reduced paid-up or even lapsed, depending on the policy terms.

Is my LIC policy still active if I take a loan against it?

Yes, your LIC policy remains active as long as you continue paying premiums and meet loan interest obligations. However, if the policy lapses due to unpaid premiums or loan default, both insurance cover and maturity benefits may be affected.

Are there any prepayment or foreclosure charges?

Typically, there are no prepayment or foreclosure charges on loans against LIC policies, whether from LIC itself or most other lenders. You can repay the loan amount in part or full at any time during the loan tenure without additional fees.

How does taking a loan against my LIC policy affect the maturity benefits?

When your policy matures, the loan amount and any unpaid interest are deducted from the final payout. If repaid in full before maturity, your maturity benefits remain unaffected. It's important to track loan repayments to avoid reduced returns.

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