LIC (Life Insurance Corporation of India) is one of the most trusted insurance providers in the country, known for offering a wide range of life insurance plans that combine protection with savings. In times of financial need—whether it’s medical emergencies, education expenses, or a temporary cash crunch—many people seek quick and reliable loan options.
What many don’t realize is that certain LIC policies can actually be used as collateral to get a loan. This lesser-known benefit allows policyholders to unlock the value of their policy without surrendering it, offering a smart and secure way to meet urgent financial needs.
Can You Take a Loan Against LIC Policy?
Yes, LIC allows policyholders to take loans against certain types of policies. This is a smart option if you need quick funds without surrendering your policy. Loans are available on traditional plans like endowment and whole-life policies, but only after the policy has acquired a surrender value. Usually, you must have paid premiums for at least 3 years to qualify.
Note: Term insurance and ULIP policies generally do not qualify for loans because they do not build cash or surrender value.
Also Read: How to Pay LIC Premium Through Credit Card: A Complete Guide
Who is Eligible to Take a Loan?
Before applying, ensure:
- Your policy is eligible—typically endowment, money-back, or whole-life plans.
- You have paid premiums continuously for at least 3 years.
- Your policy has a surrender value (the amount you would receive if you surrendered the policy).
- The loan application must be made by the policyholder themselves; nominees or others cannot apply.
If your policy meets these criteria, you can proceed with the loan application confidently.
How to Apply for a Loan on LIC Policy?
Taking a loan against your LIC policy is a straightforward process, and you have the flexibility to apply either offline by visiting a branch or online through LIC’s customer portal if you’re a registered user.
Here’s a step-by-step guide for both methods:
Option 1: Offline Method
Gather Required Documents
Before visiting the LIC branch, make sure you have the following:
- The original policy document (also known as the policy bond).
- Valid ID proof (such as Aadhaar card, PAN card, passport, voter ID).
- Loan application form — this form can be collected at the LIC branch office.
Visit the Nearest LIC Branch
Head to the LIC branch office where your policy was issued or any nearby branch. Speak to the LIC officer or customer service executive about your intent to apply for a policy loan.
Fill the Loan Application Form
Carefully fill out the loan application form. You’ll need to provide details like your policy number, loan amount requested, personal details, and contact information. If you’re unsure, the LIC staff can assist you in filling the form correctly.
Submit Documents
Submit the filled form along with your original policy document and ID proof. Ensure that all documents are complete and accurate to avoid delays.
Verification by LIC
After submission, LIC will verify:
- Your policy status (must be active and eligible for loan).
- The surrender value of your policy, which determines the maximum loan amount you can avail.
- Your identity and other details for compliance.
Loan Sanction and Disbursal
Once verification is complete and your loan is approved, LIC will sanction the loan. Typically, this process takes about 3 to 5 working days. The loan amount is disbursed directly to your registered bank account or given via a cheque as per your preference.
Receipt and Acknowledgement
You will receive an official receipt or sanction letter confirming the loan amount, interest rate, and repayment terms. Keep this document safely for future reference.
Option 2: Online Method (For Registered LIC Customers)
Log In to LIC’s Customer Portal
Visit the official website licindia.in and log in using your registered user ID and password. If you’re not registered yet, you can create an account by entering your policy details and creating login credentials.
Navigate to the Loan Section
Once logged in, look for the option titled “Online Loan Request” or “Loan Against Policy” under the policy services section.
Select Your Eligible Policy
You’ll see a list of your active policies eligible for loan. Choose the policy against which you want to apply for the loan.
Fill in the Loan Application Form Online
Enter the required details such as:
- Loan amount requested (within the allowed limit).
- Personal contact details (if not pre-filled).
- Bank account details where you want the loan disbursed.
Upload Documents (if required)
In some cases, you might need to upload scanned copies of your ID proof or other documents. Follow the on-screen instructions carefully.
Review and Submit
Review all the information for accuracy, agree to the terms and conditions, and submit your loan application.
Loan Processing and Approval
LIC will verify your application and policy details online. If everything is in order, the loan approval process usually takes a few days. You will receive notifications via email or SMS about the status of your application.
Loan Disbursal
Once approved, the loan amount is directly credited to your bank account linked with LIC. You can track the status of your loan request from your online portal dashboard.
Additional Tips for a Smooth Application
- Check Policy Eligibility Before Applying:
Make sure your policy has a surrender value and has been active for the required minimum years. - Keep Your KYC Documents Ready:
Having your Aadhaar, PAN, and bank details handy can speed up the process. - Maintain Updated Contact Details:
Ensure your phone number and email are updated in LIC records to receive timely updates. - Repayment Planning:
Understand the interest rate and repayment schedule before applying to avoid surprises later.
Interest Rate and Repayment
LIC charges an interest rate of approximately 9% to 10% per annum on loans taken against policies. This interest rate is generally lower than most personal loans or credit card interest rates, making it an affordable borrowing option.
- Interest Payment Schedule: Interest on the loan is payable half-yearly (every six months). Even if you do not repay the principal amount immediately, it is mandatory to pay the interest regularly to keep the loan active and avoid complications.
- Repayment Flexibility: You can repay the loan either partially or in full at any time, giving you the freedom to manage your finances according to your convenience. There are no fixed EMIs or rigid repayment schedules.
- Loan Recovery: If the loan amount along with the accumulated interest is not repaid before the policy matures, LIC will deduct the outstanding loan balance from the maturity proceeds or the death claim amount. This ensures the loan is secured but also means unpaid loans reduce your policy benefits.
Benefits of Taking a Loan on LIC Policy
Taking a loan against your LIC policy offers several advantages, especially for those who need quick and low-cost funds:
- No Credit Check Required: Since the loan is secured by your policy, LIC does not perform any credit or CIBIL score checks. This makes it an ideal option if you have a poor credit history or no credit record at all.
- Lower Interest Rates: Compared to unsecured personal loans or credit card debt, LIC policy loans come with significantly lower interest rates, helping you save on borrowing costs.
- Quick Disbursal: Loans against LIC policies are generally processed faster because the policy itself serves as collateral. This reduces paperwork and approval time compared to traditional bank loans.
- Flexible Repayment Options: You’re not bound by fixed EMIs. You can pay interest on a half-yearly basis and repay the principal whenever convenient, offering flexibility in managing your cash flow.
Also Read: How to Fill a Cheque for Self-Cheque Person: A Comprehensive Guide
Risks and Things to Keep in Mind
While loans against LIC policies are beneficial, there are some important considerations and risks you should be aware of:
- Regular Interest Payment is Crucial: If you fail to pay interest on time, the outstanding loan amount can accumulate and eventually exceed the surrender value of your policy. This may lead to policy lapse, meaning you lose the coverage and benefits.
- Impact on Death and Maturity Benefits: In the event of your death or policy maturity, any outstanding loan and interest will be deducted from the claim amount or maturity payout, reducing the amount your beneficiaries or you receive.
- Multiple Loans Reduce Benefits: Taking frequent or large loans against your policy can significantly reduce the maturity benefit, affecting the long-term value of your insurance investment.
Also read: Can a Car Loan Be Used for Tax Exemption? Expert Guide on Tax Benefits & Car Loans
Alternative Options if You’re Not Eligible for LIC Policy Loan
If your LIC policy does not qualify for a loan or you need additional funds, consider these alternatives:
- Loan Against Fixed Deposit: Many banks offer loans against your fixed deposit as collateral, often at competitive interest rates.
- Loan Against Gold: You can pledge gold jewelry or coins to get quick loans from banks or NBFCs.
- Loans from NBFCs or Digital Lending Apps: Non-banking financial companies and digital lenders provide personal loans with flexible eligibility criteria.
- Personal Loan with Guarantor: If your credit score is low, applying for a personal loan with a guarantor may improve your chances of approval.
Read out Can I Get a Loan Without a CIBIL Score?
Conclusion
Taking a loan against your LIC policy is a safe, affordable, and convenient way to access funds during emergencies or short-term financial needs such as medical bills, education fees, or other urgent expenses. Since the loan is secured by your policy, you benefit from lower interest rates and faster processing without worrying about credit checks.
However, it is essential to borrow responsibly. Always ensure you pay the interest regularly and repay the principal as soon as possible to avoid jeopardizing your policy benefits. Keep track of your loan balance and understand how it affects your policy maturity or death benefits.
If you have a valid LIC policy with surrender value, this loan option is definitely worth considering. Before proceeding, check your surrender value, review the loan terms carefully, and consult your LIC agent or branch to make an informed decision that suits your financial situation.