How Can Your Insurance Policy Help You Get A Loan?
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Today, everyone has some or the other insurance policy in their name. It is treated as an essential financial investment that protects you and your family from the unforeseen. An insurance policy can also help you raise funds. Many banks offer the option of taking a loan against your insurance policy on the basis of certain terms and conditions. This is a very useful option in case of financial emergency or if one needs to get quick money to meet short term needs.
This type of loan lacks awareness in our country however is a popular concept in many other countries in the world. The insurance policy itself works as a collateral and therefore, no other guarantee is required. It is one of the most simple and convenient forms of loan that is available in the market.
Purpose of Loan Against Insurance Policy
Insurance policy is normally taken to protect your family in case something happens to you. Now with the option of a loan that can be taken on this policy, it helps in meeting short term financial requirements or an emergency. One can get this loan on the basis of listed policies by each bank. Most loans are offered on unit-linked plans and endowment plans. It is one of the most convenient ways to raise funds when in need as it does not require any additional collateral by way of assets.
Features of Loan Against Insurance Policy
Loan against insurance policy is a popular concept abroad. In India, while it is available as a product in the market, most people are not aware of this option. The number of people who take insurance can be significantly higher in the country as compared to other countries. Some of the main features of this loan are :
- The rate of interest is quite competitive on this type of loan and is normally lesser than the regular personal loans.
- The repayment options are quite flexible.
- Depending on the amount of insurance, one can avail principal loan amount of a high value.
- The eligibility criteria are relaxed by most lenders as there is an insurance policy already in place.
- Some lenders offer the option of applying online for this type of loan making it even more convenient.
- Minimal documentation is required to get this loan.
- A nominal loan processing fee is levied on this type of loan.
Eligibility Criteria for Loan Against Insurance Policy
Loan against insurance policy has relatively relaxed eligibility criteria as compared to other regular loans.
- Minimum age of 21 years
- Salaried or self-employed with an insurance policy
- Resident of India
- Some banks specify a minimum amount of insurance policy to be taken
- Must have a regular source of income
Benefits of Loan Against Insurance Policy
With increasing needs of different financing options, a loan against insurance policy works as a gem for an individual in immediate need. It is one of the best solutions to borrow money for a short-term requirement or an urgent need. Some of the key benefits of this type of loan are:
- Additional collateral/asset is not required as the insurance policy itself acts as a guarantee.
- Interest rate on this type of loan is normally lesser than a personal loan.
- Since the loan is secured in the first place itself with the insurance policy, there are very less chances of loan application rejection.
- Even if the policy holder passes away during the tenure of the loan, the remaining balance of loan repayment amount is deducted from the policy amount and the balance is given to the nominee.
- Loan against insurance policy can be applied online as well making the whole process hassle-free and quick.
Conclusion
Walk into any bank branch and one can consult a representative directly to understand more about the loan product. This is one of the best ways to get information and submit your application as one can receive personal consultation. Many queries can be clarified through personal interaction with a bank.
Also read- Importance And Benefits Of Life Insurance
