Secured loans such as home loans and loans against property have long been preferred choices. However, if you have a life insurance policy, it can serve as a powerful financial tool during emergencies. A loan against an insurance policy allows you to access emergency funds without liquidating your assets quickly and efficiently.
Need instant funds without selling off your assets? Apply for a Loan Against Insurance and get funds against your ULIP or endowment plan with minimal paperwork.
Let’s explore the key benefits and limitations of this option to help you make an informed decision.
Pros of a life insurance policy loan
1. Reasonable interest rates
One of the major advantages of a loan against a life insurance policy is the competitive interest rate. Since the policy itself acts as collateral, the lender's risk is reduced, resulting in lower rates compared to unsecured loans. This makes it an economical choice when you’re facing a cash crunch.
Looking for low-cost funds fast? Secure competitive interest rates on your existing ULIP or endowment policy. Apply now
2. Easy availability of loans and less documentation
Getting a loan against your life insurance policy is relatively hassle-free. Unlike unsecured loans that require income proof, bank statements, and extensive KYC, here, the documentation is minimal. Typically, you’ll only need to submit your KYC documents and a copy of your insurance policy.
Once submitted, the loan is disbursed quickly, often within a few working days.
3. Extensive repayment tenure
These loans usually come with a flexible repayment tenure often going up to 96 months. This gives you ample time to repay the loan without disturbing your financial stability. Whether you’re a salaried professional or self-employed, this flexibility can ease your monthly cash flow management.
4. Credit limit
The sanctioned loan amount is set as a credit line meaning you only pay interest on the amount you actually use, and for the duration you use it. This structure works especially well for short-term or staggered expenses.
Example: If you are sanctioned Rs. 20 lakh and withdraw Rs. 5 lakh for six days, interest applies only on Rs. 5 lakh for those six days.
Need flexible fund access without overpaying interest? Apply for a loan against your insurance plan today
5. Tax benefits
In certain situations, the interest paid on a loan against an insurance policy may be eligible for tax deductions. While not universally applicable, consulting a tax professional can help you understand how to make this facility more tax-efficient.
6. Quick and easy application process
The application process is simple and available both online and offline. With digital KYC and minimal steps, your loan journey is fast and frictionless.
7. Can be used for various purposes
Funds availed through a loan against insurance come with no end-use restrictions. You can use them to manage medical emergencies, renovate your home, pay off existing debt, or fund a child’s education. It’s your asset, and you decide how to use the funds.
