How to utilize loans against LIC policies


 Did you know that by the end of 5 years after purchasing a life insurance policy, 1 in 2 policies have lapsed? With LIC having over 70% of the life insurance market by volume, this means that half of LIC Policy holders are losing money, rather than building wealth as they set out to! 

Don’t be one of them. Make your policy work for you, and help you unlock liquidity whilst growing your long term wealth and enjoying the insurance protection. 

Wondering how to do this? Explore Mera Kal’s Loans against LIC, using your LIC policy as collateral. Loans against your LIC policy offer unique advantages such as affordable loans without CIBIL score checks and minimal documentation. This article delves into the intricacies of leveraging loans against LIC policies with Mera Kal, providing insights on how to secure a low-interest loan without the need for a credit/ CIBIL score or income proof.


Understanding Loans Against LIC

Loans against LIC policies are a financial instrument that allows policyholders to borrow funds against the surrender value of their life insurance policies. The surrender value is the amount available to the policyholder in the case that they choose to surrender the policy before its maturity date. This facility provides a unique opportunity to access liquidity without compromising the insurance coverage. You can find out your surrender value by using our surrender value calculator at the bottom of this page!


Bypassing CIBIL Score Checks

One of the significant advantages of opting for a loan against LIC is the absence of stringent credit score checks. Unlike traditional loans, which heavily rely on an individual's creditworthiness, loans against LIC are secured by the value of the policy. This makes it an attractive option for individuals with a less-than-perfect credit history or those without a substantial credit record.

Alternative Secured Loan

As this is a secured loan as well, it is a great alternative to gold as you don’t need to wear your policy to family functions! It’s also affordable, at 10% per annum interest, which is significantly cheaper than any personal loan options.

 No Income Proof Required

Another noteworthy feature of loans against LIC is the relaxed documentation requirements. Traditional loans often mandate rigorous income proof submissions, creating hurdles for those with irregular income or those unable to provide the necessary documentation. Loans against LIC, however, are more lenient, allowing individuals to secure a loan without the need for detailed income verification.

 Unlocking Low-Cost Financing

Compared to many other financing options, loans against LIC policies often come with lower interest rates. Since the loan is secured against the value of the policy, lenders perceive it as a lower-risk transaction. This translates into cost-effective financing for policyholders, making it an attractive choice for those seeking affordable loans.


Steps to Avail Loans Against LIC

Lets introduce you to Shreya, our happy exemplar LIC policy holder. Let’s say Shreya has been contributing 1,000 Monthly to her LIC Policy for 8 years, let’s see how she can avail this loan:

Step 1: Shreya expresses her desire to take a loan against her LIC policy. She applies for a loan through Mera Kal by uploading an image of her policy document, or providing consent for Mera Kal to pull her policy information from LIC.

Step 2: Now, Mera Kal checks her eligibility – the value of the policy (what it’s worth if you surrender it today), whether it’s still active, and that no other loan has been taken on it. Based on these factors, if eligible, we share the loan amount with Shreya, which is typically 85% of the surrender value of her policy.

  • Quick tip: You can use our Mera Kal Surrender Value Calculator right now to find out the loan amount you may be entitled to!

 Step 3: If she would like to take the loan, the next step is KYC verification – proof of address and ID so the lender is sure they know who she is.

Step 4: Once Shreya’s KYC is verified, the loan gets sanctioned for the agreed amount and term, and she is made aware of the repayment terms – 2 interest payments each year, and flexible principal payments.

Step 5: Now, Shreya must assign her LIC policy to the lender; to do so she must sign an assignment form that Mera Kal will take to LIC, along with her policy document to complete the process.

Step 6: Once the lender receives the confirmation that the policy has been assigned to them,  they will set up a mandate for Shreya’s interest payments, and issue a loan agreement.

Step 7: Once Shreya signs the agreement with an OTP, the loan is disbursed to her account!


 Loans against LIC policies offer a valuable avenue for those seeking loans without the constraints of a CIBIL score or income proof. With the added benefit of low-cost financing, this financial tool provides a practical solution for individuals looking to unlock liquidity while preserving the security of their life insurance coverage. 

As with any financial decision, it is crucial to make informed choices that align with your unique financial circumstances. If you would like advice on what the best product for your context is, contact us and one of our Saathis will be more than happy to assist you.

Talk to a Saathi today!

Varun Sanjeev

March 11, 2024

Take a loan against your insurance policy today with us!

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