Applicable fees and charges for loan against insurance policy
The following charges are applicable on loan against life insurance policies:
| Types of fees | Charges applicable |
| Interest rate | Up to 24% p.a. In case of lock-in policies, compounding interest will be charged In case of lock-in free policies, simple interest will be charged |
| Processing fee | Up to 3% (inclusive of applicable taxes) of the loan amount or Up to Rs. 10,000 (inclusive of applicable taxes) |
| Flexi fee | Not applicable |
| Prepayment charges | Full prepayment - Up to 4.72% (inclusive of applicable taxes) on the outstanding loan amount as on the date of full prepayment Part-prepayment - Up to 4.72% (inclusive of applicable taxes) of the principal amount of loan prepaid on the date of such part prepayment |
| Bounce charges | Rs. 1,200/- per bounce. “Bounce charges” shall mean charges for (i) dishonour of any payment instrument; or (ii) non-payment of instalment (s) on their respective due dates due to dishonour of payment mandate or non-registration of the payment mandate or any other reason. |
| Penal charge | For LIC (ULIP & Endowment) and Non-LIC (Endowment) Policies - Delay in payment of instalment(s) shall attract penal charge of Rs. 8/- per day per instalment from the respective due date until the date of receipt of the full instalment(s) amount. For Non-LIC (ULIP) Policies - Delay in payment of instalment (as per payment frequency mentioned in the Sanction Letter) shall attract penal charges as more particularly described in Annexure I from the respective due date until the date of receipt of instalment (as per payment frequency mentioned in the Sanction Letter) /principal/overdue amount. To view Annexure 1 kindly click here. |
| Stamp duty (as per respective state) |
Payable as per state laws and deducted upfront from loan amount |
| Annual maintenance charges |
Up to Rs. 2,949/- (inclusive of applicable taxes) if the loan tenure is above 12 months |
| Renewal Fees | Up to Rs. 2,950/- (inclusive of applicable taxes) to be collected on renewal |
| Legal charges | Recovery of charges |
| Broken period interest/ pre-monthly instalment interest | Broken period/ pre-monthly instalment interest shall mean the amount of interest on loan for the number of day/s which is/are: Scenario 1: Over and above the period of 30 days from the date of disbursement of the loan Method of recovery of broken period interest/ pre-monthly instalment interest: Added to the first instalment amount Scenario 2: Less than period of 30 days from the date of disbursement of the loan, interest on first instalment will be charged for actual number of days |
Frequently asked questions
1. If the policy is in a lock-in period, a bullet interest payment will be made on completion of the policy lock-in period. A bullet repayment is a lump sum payment made for the entirety of an outstanding dues under the loan amount at maturity.
2. If the policy is out of the lock-in period, the interest is calculated and payable monthly.
In case of lock-in policies, compounding interest is to be charged.
In case of lock-in free policies, simple interest to be charged.
No, you cannot convert the principal amount to EMIs.
The interest rate for a loan against an insurance policy depends on several factors, including the policy type, surrender value, loan amount, credit score, and so on. These factors may vary from one lender to another. It is essential to take into account these factors before making a decision.
Financial institutions determine the applicable interest rate on these loans by taking into consideration the premiums paid by borrowers till date. Borrowers who have paid more premiums towards their insurance plan can get the loan at a lower rate compared to customers who have paid a lesser number of premiums. Generally, the interest rate on this type of loan ranges between 10-15% p.a.
