No one wants to be in a financial crunch. Thanks to many factors, financial demands can occur anytime, and for anyone. And it is only smart to look for solutions.
Speaking of solutions, there is a lesser known option - loans against insurance policies. People are now coming to understand that they can get quick funds by using their existing insurance as collateral. This type of loan not only provides a better and easier access to funds, but also has a comparatively lower interest rate than the regular personal loan. The application process is also generally straightforward, making it an attractive choice for those in need of access to funds.
It comes as no surprise that several NBFCs and banks have started offering loans against insurance, and Mera Kal makes it easy for you to navigate the market.
Let’s explore some of the top banks offering loans against insurance in India!
Understanding Loans Against Life Insurance Policies
Let’s start with what exactly is a loan against a life insurance policy?
A loan against a life insurance policy allows a policyholder to borrow money using the life insurance policy as collateral. It is available for policies that build cash value, such as endowment, unit-linked insurance plans (ULIPs), pension and annuity plans.
This type of loan allows the policyholder to borrow a percentage of the accumulated value in the policy, without affecting the policy's life coverage. It is an alternative to surrendering the policy when cash is needed, helping to retain the policy benefits.
The loan amount is based on the policy's surrender value—not just the premiums paid.
Surrender Value is the amount you receive if you decide to terminate your life insurance policy before it matures. It’s not simply equal to the total premiums you’ve paid. The actual surrender value depends on several factors, including the age of your policy, accrued bonuses, and specific terms outlined in your policy.
One can borrow up to 90% of the surrender value, depending on the lender's terms.
Wish to know how your loan amount is calculated? How is SV calculated?
Let’s try to understand this with an example -
Let’s assume:
You’re in the 15th year of your policy.
You’ve paid ₹1,00,000 in premiums.
The bonus accrued is ₹10,000.
Surrender Value Factor: 70%.
Bonus Factor: 22%.
Surrender Value Calculation:
Premium Contribution: 70% of ₹1,00,000 = ₹70,000.
Bonus Contribution: 22% of ₹10,000 = ₹2,200.
Total Surrender Value: ₹70,000 + ₹2,200 = ₹72,200.
So, the surrender value of your policy is ₹72,200, not ₹1 lakh. And if you apply for a loan, it’s this surrender value that determines the loan amount, usually a percentage of the surrender value.
Now, let's explore the top 5 banks in India that offer loans against insurance policies in 2024.
Top 5 Banks Offering Loans Against Insurance in India
A loan against an insurance policy is a convenient way to get funds without surrendering your life insurance policy. Here’s a list of the top five banks that offer loans against insurance in India in 2024:
- HDFC Bank
HDFC Bank is known for its customer service and quick processing times. They offer loans against life insurance, making it a great choice for individuals looking to leverage their insurance policies for financial needs.
They offer a maximum of Rs. 40 lakhs as loan against insurance policy, at a rate of interest starting 9.50%. You will have to repay the loan amount within 6 years of disbursement.
- ICICI Bank
ICICI Bank is another top bank in India that provides loans against insurance policies. They have a streamlined process that makes it easy for customers to access funds quickly.
At ICICI Bank, you can get a loan against insurance of about 80-90% of the surrender value, and the amount may range from Rs. 50,000 to Rs. 5 crores. The rate of interest starts at 10.85%. The tenure of the loan can range from 1 to a maximum of 6 years.
- Kotak Mahindra Bank
Kotak Mahindra Bank is also known for providing loans against insurance policies with a smooth application process. They focus on customer satisfaction and offer competitive rates.
They offer up to a maximum of Rs. 40 lakhs of loan, and the rate of interest depends on the applicable rate at the time of issuance of the policy. They also give a repayment tenure of maximum 6 years.
- Axis Bank
A key player in the field, Axis Bank offers loans against insurance at attractive terms. They cater to various insurance products. Their customer-centric approach makes them a popular choice among borrowers.
You can avail a maximum of Rs. 40 lakhs at a ROI starting 11%, and the repayment tenure may vary between 1-7 years.
- IDFC First Bank
Although a relatively new entrant in the banking sector, IDFC First Bank has emerged as a strong player in the loans against insurance space. They offer a hassle-free process, making it easier for customers to access the funds they need.
Offering a maximum of Rs. 10 lakhs as loan on insurance policy, their rate of interest varies between 10% to 24%. They offer a loan tenure of up to 5 years.
Apart from the aforesaid banks, Bajaj Finserv is also a key player in this industry, offering loans against life insurance policies. Note that all banks and NBFCs currently offer a physical process, requiring a branch visit and forms to be filled in.
Remember, before taking a loan against your insurance policy, carefully consider your financial situation and repayment capacity. It's essential to choose the right lender and understand the terms and conditions of the loan.
Consider Mera Kal for a hassle-free loan against policy
Mera Kal works with a number of leading banks and NBFCs to make the process of securing loans against insurance even easier, and more digital.
Mera Kal has emerged as a trusted organization specializing in providing loans against LIC and other insurance policies issued by companies such as HDFC Life, SBI Life, Max Life, ICICI Pru Life, Kotak Life, etc. Ours is a simple process, we match you with the best lender for your needs, whether it is a term loan or overdraft, each tailored to meet different financial requirements. You can choose the best option for your situation, with interest rates starting as low as 8% flat per annum.
- Quicker disbursal: We understand that loan against insurance is an option that people usually choose during an emergency, which is why we make sure that your loan amount is disbursed within a short time. The disbursement of the loan happens immediately after the process is completed.
- Build credit score: While the documentation is hassle free, there are other benefits too. You can build your credit profile with timely repayment of your installments.
- Lower rate of interest: Our interest rates for these loans are a lot more affordable, at only 8% flat. This makes it easier for you to manage repayments without stretching your budget. With our LIC policy loan interest rate calculator, you can find out how much you will actually have to shell out.
- Flexible repayment: At Mera Kal, we allow you to make re repayments at your convenient pace, so there is no pressure of the due date.
- Retain policy benefits: When the loan is disbursed, it doesn't affect the policy and its benefits. If you keep paying the policy premium on time, your surrender value and other benefits stay intact post repayment of the loan.
By choosing Mera Kal, you can access the funds you need without the usual complexities. At Mera Kal, you can avail loan against your life insurance policy issued by leading insurance companies such as LIC, Kotak Life, SBI Life, Max Life, HDFC Life and ICICI Pru Life.
So what are you waiting for? Get in touch with our team, right away!