Personal Loan against LIC Policy: Benefits, Eligibility, Cons

At the time of financial trouble or urgent need of money, there are two options a person has to overcome the problem viz. borrowing money from acquaintance or bank. Although anyone at the time of need would first approach their near ones but still there are times when they are not able to help either due their own personal reasons. In such scenarios, taking a personal loan from bank is the only option left and it is quick way to do it. Although interest rates are very high but for those having LIC policy can avail personal loan from LIC.

How to get personal loan against LIC policy?

  • Eligibility: In order to be eligible to avail the loan, applicant must have paid full premium in the last 3 years.
  • How to apply: There are two ways of application. You can personally visit LIC branch office or ask your agent to do all the formalities for you.
  • Documents required: Very basic documents are needed. You just need to submit original policy documents, cancelled cheque, ID proof (PAN card, driving licence, voter ID card, passport, Aadhaar card etc.). Read more on benefits of Aadhaar card.
  • LIC does not mandate to provide address proof.

Benefits or Features:

  • The most important benefit of personal loan from LIC against policy is that the interest rate is very low compared to the ones offered by various banks. The interest rate is 9% whereas banks typically charge between 16%-24%. So you can imagine the money you will save.
  • Another benefit is that CIBIL score is not checked by the LIC which is always done by other financial institutions in order to check whether the loan applicant is credit worthy and what was his/her previous loan/credit repayment history. They do this to avoid defaulters as it hurts their profits. Check out how CIBIL defaulters can get personal loan?
  • Unlike financial institutions which charges a fixed EMI every month, LIC does not require borrower to pay fixed repayment amount every month. Repayment option is flexible and principal amount to be paid is upto you. There is no minimum cap.
  • If you are unable to pay the principal, then there is an option of paying the interest amount. However remember that this principal amount will be adjusted from the maturity amount.
  • There is no processing fee required and no pre-closure charge. This is charged by the banks.
  • Interest rate is calculated bi-annually i.e. every 6 months.

How much loan amount you can get:

Applicant will get loan which is equal to 90% of the surrender value of the policy. So for e.g. if the surrender value is Rs. 1, 00, 000 then the loan amount will be Rs. 90, 000.


  • Online repayment not possible. So every time you will have to visit respective LIC branch to pay the repayment amount.
  • Since loan amount depends on the surrender value.
  • If the debt amount goes above the surrender value then LIC has rights for termination of the policy. This will impact your family’s financial security. This is because in your absence, nominee won’t receive money.

How does LIC pay the loan amount?

Once your application is approved, LIC will give you a cheque which can be deposited in your bank account. Many a times, LIC will send the cheque through postal service. It all depends on the officer dealing with your application.

What happens after you repay the loan amount?

LIC will handover all the policy documents after complement repayment.

Personal loan against LIC policy is a good solution for those requiring money urgently either for marriage, education, travel etc.

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