Reasons To opt For Loan Against LIC

Life insurance is a backup plan against the risk that life brings. Life insurance corporation of India, also called LIC, is the oldest and most highly reliable company in the sector, owned by Finance Ministry, the Indian Government. It offers different insurance schemes like money-back plans, term plans, pension plans, child plans, and health insurance plans. 

LIC even offers LIC loan against its insurance policies, which can assist you in solving your different financial requirements. Note that this is like an Aadhar card loan, which can be used for any purpose. The only difference is LIC loan is secured in nature while the Aadhar card loan is an unsecured credit option. 

What is a loan against LIC?

An individual needs a loan when he/she views it to be a suitable means of solving financial issues. However, at times, availing of a loan can cost more than assumed. In such scenarios, a loan against LIC is a prudent choice. LIC provides loans against insurance, which one can use for commercial and personal requirements. LIC insurance acts as a security for loans availed. Any outstanding loan proceeds are deducted from its maturity benefit if the policy matures and the loan gets repaid. Death benefit gets paid post deducting the loan proceeds in case of the death of the policyholder. 

Why choose a loan against LIC?

5 top reasons why you must select a loan against LIC

  • An individual goes through a quicker process for obtaining a loan against life insurance security. 
  • An individual doesn’t require canceling or surrendering their insurance to get the loan. Hence, they can simply mitigate their expenditures while keeping their savings intact. 
  • Documents required to get approval for a loan include identity proof, policy deed and identity proof. Thus, it has a smoother procedure because zero additional documents or any credit score is needed. 
  • The lower rate of interest and higher loan proceeds make this offer irresistible. 
  • Zero processing charge or hidden fees. 


Loan against LIC is extremely advantageous to Indian consumers owing to the following reasons – 

Higher loan proceeds

LIC policyholders can avail up to 80 to 90 percent of surrender value in the form of loan proceeds. Thus, this makes it one of the attractive options in the market. 

Lower rate of interest

Availing loan against LIC policy can cost you a lower rate of interest as compared to a personal loan, which often is usually 12 – 24 percent p.a. The interest charged is computed based on the overall amount and frequency with which the premium is paid. The higher the frequency, as well as the premium, paid, the lower the rate of interest. LIC provides a 10 to 12 percent rate of interest for personal loans against the policy. 

Faster loan disbursal

Loan against LIC is processed and disbursed way quickly because there is zero complex documentation required. You can get your loan to proceed within a span of only 3 to 5 days. 

Secured loans

As the loans are disbursed, taking your LIC as collateral, they are way more secure in nature. 

Eligibility parameter

The eligibility criteria are to opt for the loan against LIC as follows

  • Individuals must be Indian citizens. 
  • Individuals must be at least the age of 18 years. 
  • Policy owned by individuals must enable loan facility. 
  • Policy owned by an individual must have surrender value against which the loan can be availed.


You need the following documents to get a loan against LIC  

  • Original documents of insurance policy
  • Loan application for it
  • Assignment deed where you can allot the loan to the LIC
  • Individual’s income proof
  • Individual’s address proof
  • Individual’s identity proof

Repayment policies

Repayment of loan against LIC is flexible as it is not paid in the form of EMI. The repayment tenure ranges from a minimum term span of six months to the maturity of an insurance policy. If an individual settles a loan within a minimum term of six months, then he/she is liable to make the payment of interest for the whole six months duration.

The individual holds the choice to repay the loan through the listed methods

  • Repay principal component alongside interest.
  • Settle principal amount with claim amount at maturity time of insurance. Hence, you must repay just the interest component.
  • Repay the interest constituent yearly and pay the principal component differently.

Note that LIC has all right to terminate or end the policy in the case if the overall debt component is due and surpasses the surrender amount. If the repayment amount surpasses the loan policy period, then LIC may deduct the proceed of the loan offered from the maturity amount of the policy. 

What are the steps to get a loan against policy?

An individual can place the application for a loan in the following ways


  • Approach the nearest LIC office
  • Fill up the loan application form
  • Provide the needed documents
  • Once processed, the loan will get disbursed in 3 to 5 days. 


An individual can avail of the online loan facility registered for the premium service on the insurer’s site. Important steps to be followed include –

  • Visit the insurer’s site
  • Select the ‘online loan’ tab
  • You will get redirected to the next web page
  • Here select ‘Through customer portal’ to request the online LIC loan
  • You would then require providing your user ID, date of birth and password for the login
  • Once you log in, you can select which policy you want to take
  • Proceed to make the loan request
  • Once processed, the loan will get disbursed in 3 to 5 days
  • Loan documents can then get mailed to the registered email for future reference


  • Loan policy status can be simply checked through SMS or call
  • In the case of interest repayment proceed surpasses thirty days from the due date, LIC has all right to foreclose the policy and settle the loan proceed
  • In the case there is a situation of any sudden demise of the policyholder, LIC holds all right to reduce the loan amount and interest and proceed from claim settlement. Post deduction, the rest of the amount will be sent to beneficiaries of an insurance policy. 

Ending note

A loan against LIC has huge benefits because it is a reliable and trusted source and a simpler process to get a secured loan with a lower rate of interest. A policyholder of the LIC thus has an additional benefit to secure their future along with simple accessibility to get loans for a financial crisis. 

For more valuable information visit this website

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button