You now have the opportunity to draw funds up to a certain amount against your life insurance policy. The best part about this is that you still own the policy that you're putting up for collateral.
You will be able to avail liquid funds by leveraging a long-term investment, giving you the short-term financial freedom that you need today. You can still enjoy the various bonuses associated with your insurance policy, so it's one of the best ways to get a little bit of extra money.
Features of a Loan Against Insurance Policy
Conduct a thorough survey of the various lenders offering this type of finance. Each lender has their own set of terms and conditions, so find one that best suits your requirements. Of course, there are certain features that you'll find across lenders.
There's a minimum amount that you have to take when procuring an LIC loan. Many organisations even offer loans against certain conditions of an insurance policy. Although, in this case, your insurer needs to have already calculated the surrender value of your policy. The surrender value refers to the money you're entitled to receive on terminating the policy.
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Another important aspect of this method of finance is the tenure for which the loan amount is borrowed. The overall interest that you will have to pay on this type of loan will be determined by your repayment tenure.
Eligibility of a Loan Against Insurance Policy
Most organisations keep a list of insurance policies that they recognise, and which their customers are allowed to provide as collateral when applying for a loan. Apart from individuals, sole proprietors, public companies, and even partnership firms can also apply for a loan against insurance policy.
Many organisations also have certain criteria, like the age and income level, based on which they decide whether or not to sanction a loan. Keep in mind that certain policies, like a unit linked insurance plan or a term insurance scheme, can't be used as collateral against a loan.
One of the major benefits of a loan against insurance policy is that even if your credit score is not top-notch, you're still eligible to apply for this kind of loan. Thanks to this, it's a preferred method of finance among those with poor credit scores. It grants them access to funds, which they normally wouldn't be able to avail from other financial sources.
Although you can take a loan from any financial organisation, like a bank, for example, it's a lot easier to secure this type of loan from your insurer.
You'll often have the benefit of paying lower interest rates and you can negotiate terms with your insurer to work out a flexible repayment schedule.
So if you haven't already tapped into this source of easy finance, do so quickly, and you'll have the benefit of a large source of funds to satisfy your immediate requirements.
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