Loan Against Insurance: Life insurance generally provides financial protection. But in case of sudden emergency you can take loan by keeping it as collateral. Know how to get this loan opportunity.
Loan Against Insurance: Consumers generally approach financial institutions to get loans. Some customers also take loans directly through insurance policies. Currently, banks treat insurance policies as valuable collateral and lend against them after certain conditions are met. These loans can be availed only in case of certain policies like money-back and endowment policies.
If you have a life insurance policy, you may be eligible for a loan for its cash value. It does not accumulate cash value like a term life insurance policy. Taking out a loan against insurance is essentially like cashing out your insurance policy. The money the insurance company will lend you will be deducted from the cash value of your policy. In this case the interest on the loan must be paid.
Which insurance policies qualify for the loan?
No one can get a loan against any life insurance policy. Hence, it is better for you to check with the insurance company before purchasing an insurance plan. Generally schemes like whole life insurance policy, money-back policy, savings plan and endowment plan provide loan against life insurance policy. Depending on who is insuring you, you may be able to take a loan against your ULIP policy, also known as Unit-Linked Insurance Plan (ULIP).
Below are the step-by-step guidelines for getting a loan against your insurance policy-
Step 1: Check eligibility. You must first determine if the insurance qualifies for the loan. Also other eligibility factors include age, acceptable documentation, credit score etc.
Step Two: Choosing the Right Lender That is, find a lender who will lend you money against a life insurance policy. In this case it is very important to do thorough research and find the best solutions in the market.
Step Three: Apply for the loan. Once everything is arranged, you can visit the lender’s office and apply or complete the process online. However, it must be ensured that you apply for such a loan only after a thorough review of the loan documents and repayment criteria.