Loan Against LIC Policy

Loan Against LIC Policy

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Loan Against LIC Policy

Financial emergencies are unpredictable and require the best course of action to tackle them. People may consider borrowing money, taking a loan, or burning their hard-earned savings. In such a challenging situation, making the right choice is vital. If you opt to take a loan, you may need collateral. But did you know your LIC policy can work as collateral to take a loan, i.e., saviour?

Life Insurance Corporation of India is a prominent name in the insurance industry. Taking a step ahead, the company also provides the facility to take a loan against LIC policy, enabling policyholders to stay financially secure when emergencies knock. This article discusses all the details regarding taking a loan against an LIC policy—its eligibility criteria, features, benefits, interest rate, and the process to apply. Read on!

When Can We Take Loan on LIC Policy?

A loan against an LIC policy is a secured and immediate financial solution where the loan is allowed against the surrender value without surrendering the policy. Generally, a LIC policy acquires the surrender value by paying two to three full-year premiums. You can take loans against LIC policy upto a fixed percentage of the surrender value.

When taking a loan, you need to deposit your LIC policy as collateral to the lender. These loans are available at low-interest rates and, hence, are less risky. Individuals can use these loans for personal or commercial purposes. If the loan is not repaid, the amount is deducted from the death and maturity benefits payable before disbursement.

What is the Eligibility of Availing Loan Against LIC Policy?

LIC of India grants the loan when the application fulfils all the terms and conditions mentioned in the policy. The prerequisites for policyholders to apply for and take a loan on LIC policy are as follows:

  • The existing LIC policy should be in force.
  • LIC policy should differ from a term insurance policy and ULIP plan.
  • The policy must have acquired a surrender value.
  • Receipt of the loan amount should be available.
  • Loans on the LIC customer portal are allowed if policyholders have registered for the premiere services.
  • You should have the citizenship of India.
  • The minimum age allowed is 18 years or above.

How Taking LIC Loan is Beneficial from Other Types of Loans?

There are certain reasons why borrowing a loan against LIC is more beneficial than other types of loans:


Comparatively lower interest rates

The interest rate charged when borrowing LIC loan is lower than other types of loans, like personal loans or unsecured ways of borrowing. The interest rates are calculated based on the total amount and the premium payment frequency. Generally, the interest rate for an LIC loan can be around 10-12% p.a.


Flexible repayment

When an individual borrows a loan from an LIC policy, they can choose to pay the interest once or twice a year. They get the flexibility to repay the principal amount at the end of the policy term or can also adjust the sum from their maturity and death benefit payout. This breaks out the mandatory EMI repayment method.


No guarantor or security required

Unlike other types of loans, such as gold or mortgage loans, individuals do not require any guarantor or provide security to the lender. The LIC policy itself is used as collateral.


Higher loan amount

Depending on the policy terms, the policyholders can get upto 80-90% of their surrender value as the loan amount, one of the highest options available in the market.


Faster loan disbursal

The loan against LIC policy is disbursed faster than other loans as no or minimum paperwork is required. An individual can avail of a loan within 3-5 working days.

Features and Benefits of Borrowing a Loan Against LIC

Some of the key features and benefits of borrowing loan against LIC policy are mentioned below:

  1. The policyholder can avail of a loan of up to 90% of the surrender value.

  2. Multiple online platforms are available where you can apply for a loan against your LIC life insurance policy.

  3. One can use the LIC loan calculator to estimate the amount available on your LIC policy.

  4. The minimum loan repayment period is 6 months.

  5. It takes lesser loan processing time in comparison to other financial institutions.

  6. LIC of India offers credit facilities to firms, individuals, HUFs, partnerships, etc.

  7. The borrower can track LIC loan status through online and offline networks.

  8. The interest rate is declared annually by the LIC of India and is based on the policy type selected.

  9. The life cover facility and benefits continue while accessing the LIC loan amount.

  10. The interest on the loan is payable on a half-yearly basis.

  11. In case of a financial emergency, the policyholder can opt to avail of the loan rather than surrender your LIC policy.

  12. The loan amount disbursed can be used for multiple purposes, like education, debt consolidation, financial needs, education, etc.

  13. Since the loan is available against the policy, the credit score history doesn’t become stringent for policyholders.

  14. Not all LIC policies offer loans, so it is important to check beforehand to avoid any inconveniences later.

What is LIC Policy Loan Interest Rate?

The interest rates for LIC loans depend on the policy type purchased, market conditions, loan amount, and other LIC terms. LIC offers loans at competitive and low-interest rates compared to other banks offering loans. However, to have a better understanding of the same, let’s have a look at the interest rates of different banks and financial organizations for loans:

Bank/ Financial Organization Interest Rate (% per annum)
HDFC Bank 9.00 - 9.50
Axis Bank 9.50 - 10.00
ICICI Bank 9.25 - 9.75
Kotak Mahindra Bank 9.75 - 10.50
State Bank of India 9.75 - 10.25
Union Bank of India 10.25 - 11.00
IDBI Bank 10.00 - 10.75
Kotak Mahindra Bank 10.75 onwards
LIC Housing Finance 14.80 onwards

* The interest rates mentioned above are subject to change. We advise you to check the actual interest rates before availing of the loan by connecting with banks or financial institutions.

What is the Process to Apply for a Loan Against LIC Policy?

A policyholder can apply for a loan against LIC policy following both online and offline methods, as per suitability or comfort. Here’s the step-by-step guide you can follow:

Online Method

LIC of India offers the facility to apply online for a loan against LIC policy by following the given process:

  1. Go to the official website of the LIC of India at

  2. Scroll down to the ‘Other Online Services’ option and click ‘Online Loan’.

  3. On the next window, select ‘Through Customer Portal’ under the Online Loan Request section.

  4. As an existing customer, you must use your User ID and password to log in to the customer portal.

  5. Once logged in, choose the required policy from the list against which you want to avail yourself of a loan.

  6. Proceed further to make a loan request.

  7. After placing the request, you must upload your KYC documents for verification.

  8. Once verified, the loan is processed and disbursed within 3-5 working days.

  9. The loan documents are sent to the registered email address for future reference.

Offline Method

Customers can avail of a loan against the LIC policy via the offline method by following the steps:

  1. Reach the nearest LIC branch with the valid policy documents and KYC documents.

  2. Duly fill out the LIC loan application form. Here, you get to know the eligible loan amount, interest rate, tenure, etc.

  3. Submit the form with the required documents as asked by the advisor at the branch.

  4. Once processed, the loan will be disbursed in a lump sum or overdraft.

What Documents are Required to Take Loan on LIC Policy?

The policyholder needs to submit the following documents to take a loan on the LIC policy:

  • Original policy documents
  • Duly filled loan application form with the updated photographs
  • Proof of identity of the borrower: PAN card, Aadhaar card, Voter ID card, Passport
  • Proof of address: Aadhaar card, electricity bill, Voter ID card, driving license
  • Income proof: Statement of bank account, salary slips
  • Premium payment receipts
  • Bank account details/ NEFT mandate

What is the LIC Loan Repayment Policy?

Life Insurance Corporation of India offers a flexible loan repayment facility. They do not require EMI payments but can be repaid within at least 6 months or by the end of the policy tenure (up to policy maturity). The policyholder needs to pay interest on the loan twice a year. If the borrower settles the loan within the first 6 months, they still have to pay interest for the entire 6-month period. The following conditions apply for LIC loan repayment:

  • Pay the interest for a few years and the due amount anytime when you have enough funds in hand (before the end of the policy term).
  • Pay the interest regularly and adjust the principal loan amount in death or maturity benefit payable.
  • Repay the principal loan amount with the interest online.

Note that Life Insurance Corporation of India can terminate the policy if the total debt amount is more than the surrender value of the policy.

Steps to Repay Your LIC Loan/ Interest Online

Follow the given steps to repay the loan or interest amount online:

  • Go to the official website of LIC of India
  • Choose the ‘Online Loan’ option from the ‘Other Online Services’ option.
  • The next window takes you to the ‘Policy Loan Options’ page. Here, select ‘Pay Direct’ or ‘Pay through Customer Portal’ as you prefer.

When you choose the ‘Pay Direct’ option:

  • On the next window, select ‘Loan Repayment’ or ‘Loan Interest Payment’ from the drop-down menu.
  • Click ‘Proceed’.
  • Fill in all the required details for customer validation and loan particulars.
  • Check the ‘I Agree’ box to proceed and click ‘Submit’.
  • Make the payment using the desired mode of payment.

When you choose the ‘Pay Through Customer Portal’ option:

  • Sign in with the user ID and password.
  • Choose loan repayment or loan interest option.
  • Make the payment using the preferred payment mode.

Bottom Line

Life Insurance Corporation of India has made the loan application process convenient and more accessible than many other ways to borrow money. LIC loans are less risky and have flexible repayment options. Customers can apply for and repay their loans in just a few clicks using the LIC customer portal. They can check the LIC loan status anytime using the LIC e-services portal.

If you need a loan against your LIC policy, you only need to have an LIC policy that has acquired the surrender value. Contact an LIC agent for assistance through the process. Use RenewBuy Advisor Connect to find a life insurance agent or LIC agent nearby.