Insurance Policy - A lesser known loan instrument
Traditionally life insurance policies were brought for protective cover. However, with time, life insurance as a product has evolved and has become more versatile by giving the policyholder the benefit of availing loan against insurance policies. So, life insurance policies not only give you protection cover but also help you during cash crunch.
Consider some of its features and benefits before actually going ahead with it;
- Quicker and smoother procedure compared to personal loans
- Due to its fair eligibility criteria, even a person with a relatively low CIBIL score can avail the loan
- The usage of funds is not scrutinised by bankers and hence can be used for any purpose
- The policyholder has the option of either paying back the principal along with interest or only the interest amount
- Its available at 9-11% as against personal loan at 14-18%
- Such loans are only possible against specific policies such as endowment or money-back policies; and not against term insurance
- Loan eligibility is around 85-90% of surrender value
- The policyholder needs to continue paying the insurance premium even after availing loan
All such factors have helped this product gain prominence over other options available in the market. So, next time if you are planning to avail any loan, do think of this idle investment-cum-asset to arrange it for you.