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Are you looking out for a loan and thinking of some source other than a bank? Then your search has come to an end. All you need to do is dig in to find your insurance policies to avail a loan.
Life Insurance Corporation of India offers 26 policies with loan facility. A few of private insurance companies also offer loan facility against the policies. A policy can be applied for loan when the policy completes three years. For instance, Mr. Inamdar owns LIC's 'Jeevan Anand' policy and he has paid the premiums religiously for the first three years then he can certainly opt for loan in case he feels the need for money at the same time he can also avoid the long loan procedures of the banks.
The policyholder will just have to give an application along with the documents of the insurance policy. Moreover the policyholder may not even have to state any reason for the application of the loan. So it could be a personal, home or even a car loan. It will be a pleasant surprise to know that the loan is sanctioned in less than two days. This feature makes it a preferable option than a bank loan.
Credit facilities are extended against pledge of Life Insurance Policies, preferably endowment policies upto 90% of the surrender value. No advance is granted against a policy, which stands assigned to a minor. The policy should not contain any special conditions, which restricts its assign ability. Citizens have to produce the last premium receipt as a proof that the premia has been paid upto date and that the policy is in force. Loan is sanctioned after the policy is assigned in favour of the bank and registration of such assignment with LIC. 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. 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 at present is 9% that has 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.
However it should be remembered that a policy should be bought because of its insurance component and not because of its loan facility. The basic function of the policy is to provide insurance cover for the contingencies.
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