How to get loan against insurance ?
Do you have an insurance policy for yourself…?
Then you will never be out of cash…
This is because,
You will always have the option to avail loan against insurance…!
Insurance will not only be a way to protect your family’s financial future but will also take care of your current needs.
Do you know…?
You can avail a maximum loan of 90% of your surrender value. This is simply great if you need immediate cash or facing cash crunch.
You can have lots of benefits if you go by the root of having loan against insurance.
These benefits include:
No CIBIL score check:
This is probably the most important benefit you can get out of having loan against your insurance policy.
Whenever you apply for a loan then your credit history is generally checked, on the basis of which you are scored. If this score is good enough then only your loan will be sanctioned.
But if the case is opposite and you don’t have a good score card then you won’t find any say. And this is where your insurance policy will come into play.
If you take loan pledging insurance as collateral then your CIBIL score is not checked at all. That means you will be able to walk away even with bad credit score.
Since you have already gone through all the formalities while buying insurance thus you will have to deal with less documentation.
Here is the list of documents that Aditya Birla demands before financing for loan against insurance.
Not only this, they also give you pre-approved loan tenure of 1 year with a minimum loan amount of Rs.25 lac.
With Aditya Birla you can surely expect handsome cash in your hand.
We always remain concerned about the interest rates when applying for loan. But with insurance, we have don’t have to.
Interest rates are really cheap when insurance is put as collateral. It usually falls under the range 10.5% to 12.5%. This is really-really affordable when compared to interest rates on personal loans which are never cheaper than 12% and can go as high as 24%.
This makes buying loans really cheap with insurance companies. Infact according to one study published in Economic times it was stated that Life Insurance Corporation has surpassed many banks in giving personal loans against insurance.
Following the similar pattern, today companies like:
- ICICI Prudential Life, Edelweiss Tokio Life, and banks like,
- SBI,ICICI and HDFC Bank all offer loans against insurance.
It seems like loan against insurance only works in your favor. Here not only the interest rates are low but the repayment schedules are also a lot flexible.
With them you would only have to pay the interest amount and the principal can be deducted from your insurance claim.
This way you need not worry about your repayments and you will be less financially burdened.
Will you be eligible…?
Though you may reap loads of benefits but you will only be eligible to buy loans if you have insurance policies like:
- Endowment or
- Money back with features like life cover or saving elements engraved in it.
Moreover your insurance policy must be atleast 3 years old to avail such a plan.
Term insurance or unit linked plans are not at all eligible to avail loan against insurance.
How much will you get…?
It really is different for endowment and ULIP’s. If you have traditional policies (endowment or money back plan) then you can avail a maximum sum that can be 90% of your surrender value.
In case of ULIP’s you can expect upto 75% of the paid value.
What happens if you fail to pay…?
Since your loan will be linked to your insurance, thus if you fail to pay back your installments then most probably your policy will get terminated. If such a case happens then you will cease to get any further insurance benefits.
But all this will not happen all of a sudden.
First, you will be asked to reschedule your payments at your convenience. If you still fail then your installments will be left to accrue. When they will become equal to your surrender value then your policy will terminate automatically.
What happens if the insured dies in between…?
In such a case your insurance company will pay your beneficiaries after deducting the unpaid loan.
How can you apply for the loan…?
These steps will help you in getting your loan sanctioned…
- Approach a bank or an insurer to apply for the loan.
- You will then be asked to assign your policy in favor of the company you are getting the loan from.
- Once all the formalities are done, your loan will be sanctioned in no more than 3 days. But still it may vary from insurer to insurer.
- All the rights of your insurance policy will be transferred to the lender on the day your loan is disbursed.
- Though you may again have the rights back once you repay your loan.
Since now you know that insurance is a lot beneficial not only for your future but your present as well.
Consider buying it. As,
The more you delay, the more you will pay.