During a financial crisis, the first thing that a person might think of is taking is a loan. However, taking a loan can lead a person to experience an unnecessary burden of debts. In any kind of unsecured loans, the interest rates generally remain high. This can be a risky situation as there will be higher chances of defaulting an EMI.
If a person has a LIC policy, he can easily take a loan against it. As the insurance policy is a monetary commodity, the banks can provide loans against them. However, the borrower should check if the LIC policy he has is applicable to be placed as collateral for getting a loan. Generally, the term insurances can be placed as security for getting a loan against LIC policy.
Full Guidance to take a Loan Against LIC Policy
In the following part, you will get a detailed note on how to take a loan against a LIC policy. Apart from the steps, you can also get a brief account of some essential facts that you need to check while taking a loan against a LIC policy.
Step 1: Check the loan amount
You should initially check the loan amount that you can get against your LIC policy. Consider checking different loan providers if they can deliver you with the highest loan amount against your policy. In the best cases, the loan amount can elevate up to 90% of the surrender value of the policy.
As this is a technical thing, you should talk with a loan and insurance expert before finalizing the bank from which you can take the loan.
Step 2: Document verification
Document verification is the second step in the procedure of taking a loan against a LIC policy. If you want to take a loan, make sure that the LIC policy is in your name. Also, ensure that you fill-up the application form for taking the loan yourself without making any errors.
Other documents that the loan provider might need are the original copies of the Life Insurance Policy and a cancelled cheque. In some cases, the original payment bill is also asked for by the loan provider. Apart from the above, you need to produce your personal identification documents and provide their photocopies to the loan provider as per their requirements.
Step 3: Prescribe the deed of assignment
In the process of availing a loan against the LIC policy, prescribing the deed of the assignment plays a vital role. It is a crucial duty of the loan provider to sign the deed of assignment in a prescription format which will denote the conditional ownership of the policy by the insurance committee or the lending institution.
With the execution of this process, the paperwork for getting the loan is done. The lending institution will carry out a final verification process before moving on to the next step.
Step 4: Delivering the charges
A lending entity can demand a loan processing fee. This is a little amount of money that the loan borrower needs to deliver to get the money. Once the loan borrower gives the charges, the loan against the LIC policy is processed. As a borrower, you can expect to get the money in your bank account with 3 to 5 business days.
In general, the total procedure mentioned above might take some time as they are complicated. As a loan borrower, you can only consider the above process to be successful after the loan amount is entirely credited in your bank account.
Beneficial Facts of Availing a loan against LIC policy
There are certain outstanding benefits that you can get while borrowing a loan against your LIC policy. Here, the benefits are mentioned in brief.
- Easily Available: As the LIC policy is kept as collateral in case of a loan against LIC policy, the lending organizations are more eager to deliver it to the borrowers. You can get the total capital within 4 to 5 days from the completion of the paperwork agreement.
- No restrictions on usage: The loan amount that you can get from the loan against LIC policy can be used in any purpose. There will be no restrictions from the lender regarding the usage of the money. So, more people tend to take this loan.
- Lower interest rate: As mentioned earlier, the reason why loan against LIC policies has a lower interest rate is that the collateral is kept with the lender. In some instances, you might also get some outstanding flexibilities in terms of the repayments.
While availing a loan against LIC policy, you should make sure of paying the EMIs on time. Otherwise, the total policy might get forfeited. As an essential fact, you should always remember that no LIC policies are granted with a loan by the lenders unless the premiums for three years are completed. However, there are very few policies in which you can get a loan if the premium of one or two years is entirely paid. You must talk with your insurance provider regarding this matter while taking a loan.