A Loan is essential to grow our business or to fulfill our financial needs when in need. Loans are provided by the bank and the financial institution and for that, the banks charge the interest based on the market conditions. When availing the loan, the bank usually provides it on an asset possession of the loan seeker like against a property, land or other assets. If you are an LIC Policyholder then you can also avail loan against that policy that will be provided by the LIC of India. LIC is a corporation that provides the user with many benefits that include investment schemes with insurance, term insurance, etc. In this article, we will discuss various advantage and disadvantage of LIC Loan and what are the LIC that are eligible for a loan.
Advantages of LIC Loan
The following are the advantage of Loan against LIC policy
- The rate of interest on loan against LIC policy is comparatively low
- This loan is especially helpful for people with low credit ratings, as LIC does not check an applicant’s credit score before giving them a loan
- LIC does not charge any processing fees. Also, it does not charge any money on prepayment of loans
- Successful repayment of an existing loan against LIC policy allows the applicant to take loans in the future from the insurance major
- The interest on the loan has to be paid semi-annually
- There is no need for a third party or a guarantor
Disadvantage of LIC Loan
The following are the disadvantage of Loan against LIC policy
- The LIC policy that the applicant has taken will be withheld by the company in case the applicant is unable to repay the loan amount.
- If the loan debt exceeds the surrender value of the policy, then the bank reserves the right to terminate the policy.
- The maximum loan amount that can be availed depends on the surrender value of the insurance policy
- The loan against LIC policy is only made available to policyholders who have paid three years of insurance premium in full.
- The loan applicant has to be an LIC policyholder
- Prepayment can only be done after 6 EMIs have been paid
Eligibility for LIC Policy
The following are the eligibility of the LIC policies-
- The applicant should be a resident of India.
- He or she should be an LIC policyholder.
- At least 3 years of insurance premium should be paid in full.
- The borrower must be at least 18 years of age.
- The policy should be an endowment policy that has a surrender value. The maximum loan amount that can be availed cannot exceed 90% of this surrender value. For paid-up policies, this amount is 85%.
How to Apply for the Loan?
A Loan can be applied by contacting the LIC agent who has your insurance done. The loan offered by the LIC does not have any processing fee and the document that you will require are already with the LIC therefore, the loan taking process will be very simple and easy. The loan amount will be transferred to your bank account once the loan is sanctioned.