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 | For Non-LIC (ULIP) Policies -Delay in payment of instalment(s) shall attract Penal Charge at the rate of 24% p.a. 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 |
*Charges levied by NSDL to BFL and the same is being passed on to the clients.
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.
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.
