The Life Insurance Corporation of India (LIC) allows policyholders to obtain loans against certain insurance policies, using their policy as collateral until the loan is fully cleared. Eligible policy types include endowment plans, whole life plans, money back plans, and pension plans. The loan can be up to 90% of the policy’s surrender value (or 85% for paid-up policies), inclusive of bonus cash values. Loans come with interest payable biannually and require a minimum tenure of six months from disbursement.

Key Features of Loan Against LIC Policy

• Loan Amount: Up to 90% of the surrender value.
• Interest Rates: Annually announced, policy-specific.
• Minimum Tenure: Six months.
• Maximum Tenure: According to policy tenure.
• Repayment: Interest is half-yearly; principal repayment is flexible.

Alternatives to Loans Against LIC Policy

While a loan against an LIC policy is beneficial, consider secured options like Gold Loans, Loan Against Property, or Loans secured against Mutual Funds/Stocks. Unsecured loans, such as Personal Loans, appear as options provided by banks and NBFCs for those with good credit scores, offering quick approvals and disbursements.

Interest Rates on Personal Loans from Banks and NBFCs

• HDFC Bank: 10.5% to 24%, up to ₹40 lakh, tenure up to 6 years.
• Axis Bank: 10.99% to 22%, up to ₹40 lakh, tenure of 1-5 years.
• Kotak Mahindra Bank: 10.99% to 36%, up to ₹40 lakh, tenure up to 6 years.
• IDFC First Bank: 10.99% to 23.99%, up to ₹10 lakh, tenure up to 5 years.
• ICICI Bank: 10.8% to 16.15%, up to ₹50 lakh, tenure of 1-6 years.

Loans Against LIC Endowment Plans

LIC Bima Jyoti: Requires two years of paid premiums. Loan for in-force policies up to 90% of the Surrender Value; paid-up policies up to 80%. Interest is capped at the (10-year G-Sec Rate + 3%), compounded half-yearly.

LIC Bima Ratna: Requires two years of paid premiums. Loan amounts and interest rate similar to Bima Jyoti.

LIC’s Dhan Sanchay: Loans available with specific conditions based on premium payment terms.

LIC Jeevan Azad: Requires two years of paid premiums. Terms are akin to Bima Ratna.

LIC New Endowment Plan: Requires two years of paid premiums. Interest rate method approved by IRDAI.

LIC New Jeevan Anand: Requires two years of paid premiums. Interest rate is based on IRDAI's approved method.

Similar terms apply for LIC Single Premium Endowment Plan, LIC Jeevan Lakshay, LIC Jeevan Labh, LIC Aadhaar Stambh, LIC Aadhaar Shila.

Loan Against Whole Life Plans

LIC’s Jeevan Utsav: Requires two years of paid premiums. Varies based on Regular Income Benefits.

LIC Jeevan Umang: Loan terms depend on premium payment period and are fixed under IRDAI's approved interest method.

Loan Against Money Back Schemes

LIC Dhan Rekha: Loans have specific premium payment conditions and cap excesses similar to whole life plans. Other plans such as LIC New Bima Bachat, LIC New Money Back Plan – 20 Years, LIC New Money Back Plan – 25 Years, LIC Jeevan Umang follow similar guidelines.

The LIC New Children’s Money Back Plan, LIC Jeevan Tarun, LIC Jeevan Shiromani, and LIC Bima Shree have comparable criteria of eligibility and loan limits.

Loan Against Pension Plans

LIC Jeevan Dhara II: Available with certain premium conditions and capped interest.

LIC Saral Pension: Post six-month eligibility; interest component cannot exceed half the annual annuity.

LIC Jeevan Akshay – VII and LIC’s New Jeevan Shanti: Loan options based on annuity plans with precise capping.

Application Process for Loan Against LIC Policy

Apply online through LIC’s customer portal if a premier service registered customer; otherwise, visit an LIC branch.

Conclusion

Opting for a loan against an LIC policy can be financially astute for those needing funds but wishing to retain insurance coverage. However, evaluating other loans and understanding varied interest rates and terms is crucial. This knowledge aids in making informed loan choices that align with personal financial health.