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 | From up to 8% p.a. 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) |
| 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 | Delay in payment of instalment(s) shall attract Penal Charge at the rate of 24% per annum per instalment from the respective due date until the date of receipt of the full instalment(s) amount. |
| Renewal Fees | Up to Rs. 2,950/- (inclusive of applicable taxes) to be collected on renewal |
| Legal charges | Recovery of charges |
Frequently asked questions
1. If the loan against insurance 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 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.
For most loans against insurance policies, the interest rate is fixed, meaning it stays the same throughout the tenure. However, some lenders may offer floating rates linked to market benchmarks. Fixed rates provide predictability, while floating rates may fluctuate with market conditions.
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.
The interest rate on a loan against an insurance policy usually ranges between 8% and 24% per annum, depending on the lender, policy type, and borrower’s profile. Bajaj Finance Limited offers competitive rates on loans against ULIP and endowment policies, helping you access funds at affordable costs.
Yes, apart from interest, lenders may levy processing fees, documentation charges, or administrative fees. Some may also impose foreclosure or part-prepayment charges. Bajaj Finance Limited typically offers transparent terms with minimal additional costs, ensuring customers can access liquidity without worrying about hidden charges.
Yes, early repayment reduces the total interest outgo, since interest is generally charged on the outstanding loan amount and for the duration it is availed. Many lenders, including Bajaj Finance Limited, allow flexible prepayment options, helping borrowers save on interest without significantly impacting the insurance policy.
Interest rates are usually set by the lender based on policy value, surrender value, and borrower profile. While direct negotiation may be limited, having a high-value ULIP or endowment policy, a strong repayment record, or a good credit score can help you secure more favourable rates.
