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.
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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:
Lender | Interest Rate (Approx.) | Remarks |
---|---|---|
LIC of India | 9% – 10% p.a. | For active, traditional LIC policies |
Bajaj Finance | Competitive, on request | Offered against ULIP or endowment policies |
Banks & NBFCs (via partners) | 10% – 13% p.a. | May vary based on credit profile |
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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:
- Check the surrender value of your LIC policy through your LIC agent, policy document, or online portal.
- Fill in the loan application form – either on the LIC website or the lender’s platform.
- Submit required documents such as ID proof, policy bond, and a cancelled cheque.
- Assign your policy to the lender by signing the required forms (done once).
- 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)