I often hear people talking about buying a personal loan. Personal loan is a product offered by all the banks in India but always aggressively marketed by the Private Banks. I am not a believer in Private Banks and hence always advice my friends / relatives to bank with only Public Sector(Government owned banks).
Other day I was speaking with my Insurance Advisor who told me that if anyone owns a LIC Policy can avail loan from LIC at 9%. Terms an conditions mentioned below:
LIC’s website says:
’Availing Loans On PoliciesMany of our plans are of endowment type and you would be allowed to raise a loan against your policy should you require funds.
You repay the loan with interest or continue paying the interest and allow the loan to be deducted at the time of the claim payments.
Further loans on policies are also allowed after deduction of earlier out standings(Click here to find out more about loans on policies).
Most financial institutions too allow loans against LIC policies based on the value LIC quotes on request from you.
Policy Loans:
The Corporation can grant a loan to the policyholder against his policy as per the terms and conditions applicable to the policy. The requirements for granting a loan are as under:
a) Application for loan with an endorsement of terms and conditions of the loan being placed on the policy.
b) Policy to be assigned absolutely in favour of the Corporation
c) A receipt for the loan amount
The maximum loan amount available under the policy is 90% of the Surrender Value of the policy(85% in case of paid up policies) including cash value of bonus. The rate of interest charged on loans is at 9% to be paid half-yearly. The minimum period for which a loan can be granted is six months from the date of its payment. If repayment of loan is desired within this period the interest for the minimum period of six months will have to be paid. In case the policy becomes a claim either by maturity or death within six months from the date of loan interest will be charged only upto the date of maturity/death.
Same Information can also be found by following the links below:
https://licindia.in/policy_guidelines.htm#15
https://licindia.in/policy_conditions.htm#16