Loan Against LIC Policy All You Need to Know

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Loan Against LIC Policy

Loan Against LIC Policy

Loan Against LIC Policy: In today’s fast-paced world, financial flexibility is a crucial aspect of securing your future. Life Insurance Corporation of India (LIC) has been a trusted name in providing insurance solutions for decades. But did you know that your LIC policy can also serve as a valuable asset when you need financial assistance? In this comprehensive guide, we will delve into the world of “Loan Against LIC Policy,” shedding light on how it can be a lifesaver during times of need.

Introduction: Understanding Loan Against LIC Policy

Life is full of unexpected twists and turns, and sometimes, you may require funds urgently. In such situations, your LIC policy can be a financial savior. A “Loan Against LIC Policy” is a facility that allows policyholders to borrow money against the cash value of their insurance policy. It’s like unlocking the hidden potential of your policy.

Eligibility Criteria

Policy Types Eligible for a Loan

Not all LIC policies are eligible for loans. Typically, endowment policies and whole-life policies are eligible, while term insurance policies are not. It’s essential to check your policy document or consult LIC for specific details.

Minimum Policy Tenure Requirement

LIC policies become eligible for loans after a specific number of years. Usually, you can avail of a loan after the policy has been in force for three years. However, this may vary, so check your policy terms.

Loan Amount Calculation

The loan amount you can get depends on the policy’s surrender value, which is the cash value of the policy at the time of the loan application. Generally, you can borrow up to 90% of this surrender value.

The Application Process

Applying for a loan against your LIC policy is a straightforward process. You will need to provide some necessary documentation, such as your policy document, identity proof, address proof, and a loan application form.


  • Policy Document: Ensure you have your original policy document handy.
  • Identity Proof: A copy of your Aadhar card, passport, or driver’s license.
  • Address Proof: A utility bill or rental agreement can serve as proof of address.
  • Loan Application Form: Fill out the loan application form provided by LIC.

Loan Approval Timeframe

LIC is known for its efficiency. Loan approvals are usually quick, with minimal processing time. This makes it an ideal option for urgent financial needs.

Interest Rates and Repayment

Understanding Interest Rates

The interest rates on loans against LIC policies are typically lower than those on personal loans or credit cards. LIC usually charges a fixed interest rate on these loans, which remains constant throughout the loan tenure.

Flexible Repayment Options

Repaying a loan against your LIC policy is convenient and flexible. You can choose to repay the interest regularly and the principal amount at your convenience. There are no prepayment penalties, giving you the freedom to clear the loan ahead of schedule.

Benefits of Opting for a Loan Against LIC Policy

No Credit Checks

One significant advantage of this type of loan is that LIC does not conduct credit checks. So, even if you have a low credit score, you can still qualify for a loan.

Lower Interest Rates

Compared to personal loans and credit cards, loan against LIC policies offers significantly lower interest rates, making it a cost-effective borrowing option.

No Prepayment Penalties

If you decide to repay the loan early, LIC does not impose any prepayment penalties. This can help you save on interest costs.

Risks and Considerations

While a loan against LIC policy offers several benefits, it’s crucial to consider the potential risks.

Impact on Insurance Coverage

Taking a loan against your policy reduces its cash value, which can impact the insurance coverage. Ensure you understand the implications before proceeding.

Default Consequences

Failing to repay the loan can lead to the policy lapsing, which can result in the loss of insurance coverage and other associated benefits.

Loan Against LIC vs. Traditional Loans

Let’s compare the advantages of taking a loan against your LIC policy to traditional loans.

1. Quick Processing

LIC loans are known for their speedy approvals, making them an excellent choice for urgent financial needs.

2. Minimal Documentation

Compared to traditional loans, the documentation required for a loan against LIC policy is minimal and hassle-free.

3. Competitive Interest Rates

The fixed interest rates offered by LIC are often more competitive than those of traditional lenders.

4. Tax Implications

Understanding the tax implications of a loan against your LIC policy is essential. The interest paid on such loans is generally not tax-deductible, so it’s crucial to plan your finances accordingly.


A “Loan Against LIC Policy” is a versatile financial tool that can provide much-needed liquidity during emergencies. It offers lower interest rates, minimal documentation, and flexible repayment options. However, it’s crucial to understand the associated risks and consequences to make an informed decision. By leveraging your LIC policy, you can unlock your financial potential and secure a brighter future.

Frequently Asked Questions (FAQs)

What is the maximum loan amount I can get against my LIC policy?

The maximum loan amount usually depends on the surrender value of your policy, and LIC typically allows borrowers to take up to 90% of this value as a loan.

Can I take a loan against a lapsed LIC policy?

In most cases, a lapsed policy is not eligible for a loan. However, it’s best to check with LIC for specific terms and conditions.

Is the interest on a loan against LIC policy tax-deductible?

No, the interest paid on a loan against LIC policy is generally not tax-deductible. It’s essential to consult a tax advisor for precise information.

What happens if I cannot repay the loan?

If you fail to repay the loan, it may result in the policy lapsing, which can lead to the loss of insurance coverage and associated benefits.

Can I take multiple loans against the same LIC policy?

Yes, you can take multiple loans against the same LIC policy, provided you meet the eligibility criteria and have sufficient cash value in the policy.

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