LIC Loan Against Policy Complete Guide

Get cash from your LIC policy without surrendering it. Up to 90% of surrender value at just ~9-10% interest.

✍️ By Team Lic Calculator 🔍 Reviewed by Haresh Hirapara (20+ yrs in Insurance) 📅 Updated: August 2026 ✅ Expert Verified
📌 Quick Answer

You can borrow up to 90% of your policy's surrender value at approximately 9-10% interest per annum. Your policy stays active — life cover, bonus, and maturity all continue. No fixed EMIs — repay anytime. Much better than surrendering. Apply at your LIC branch with the policy bond.

📋 Table of Contents
  1. What is a Loan Against LIC Policy?
  2. Eligibility & Loan Amount
  3. Interest Rate & Comparison
  4. How to Apply — Step by Step
  5. Repayment Options
  6. Loan vs Surrender — Why Loan Wins
  7. Frequently Asked Questions

What is a Loan Against LIC Policy?

A loan against LIC policy lets you borrow money using your policy as collateral — without surrendering it. Think of it as using your policy's built-up value (surrender value) as a guarantee to get quick cash.

✅
Policy stays active

Life cover continues, bonus keeps accruing, maturity benefit is preserved

💰
Low interest rate

~9-10% p.a. — much cheaper than personal loans (12-20%) or credit cards (24-42%)

🔓
No fixed EMIs

Repay whenever you want — full or partial. No prepayment penalty

Eligibility & Loan Amount

Minimum Premiums Paid3 years (policy must have surrender value)
Maximum Loan Amount90% of surrender value (some plans 85%)
Interest Rate~9-10% p.a. (compounded half-yearly)
RepaymentFlexible — repay anytime, no EMIs
Processing Time5-7 working days (some branches 2-3 days)
Processing ChargesNil — no processing fees
CIBIL Check Required?No — your policy is the security, no credit check

Example: If your Jeevan Anand policy (₹10L SA, 10 years paid) has a surrender value of approximately ₹6,50,000:

Maximum Loan = 90% × ₹6,50,000 = ₹5,85,000

Interest Rate — How It Compares

Loan TypeInterest RateCIBIL Needed?
LIC Policy Loan9-10% ✓No ✓
Gold Loan9-12%Varies
Personal Loan (Bank)12-20%Yes
Personal Loan (App)18-36%Yes
Credit Card24-42%Yes

*Interest rates are approximate and may vary. LIC policy loan rate is one of the lowest available loan options in India.

How to Apply — Step by Step

1
Visit Your LIC Branch

Go to the servicing branch of your policy. Carry the original policy bond, Aadhaar/PAN card, and a cancelled cheque.

2
Fill Loan Application Form (5188)

Mention your policy number, desired loan amount, and bank account details for disbursement.

3
Submit Policy Bond

LIC keeps your policy bond as security until the loan is repaid. You get a receipt acknowledging the deposit.

✓
Loan Disbursed in 5-7 Days

Amount credited directly to your bank via NEFT/RTGS. No processing charges.

Repayment Options

LIC policy loans have the most flexible repayment of any loan:

💳
Option 1: Repay Anytime

Pay the full loan + interest at any time. No prepayment penalty. Visit your branch or pay online.

📊
Option 2: Partial Payments

Pay interest periodically to prevent it from compounding. Repay principal whenever you can.

🔄
Option 3: Auto-Adjustment at Maturity

Don't repay at all — the outstanding loan + interest is automatically deducted from your maturity amount. You receive the balance.

⚠️ Warning: If you don't repay, interest compounds half-yearly. Over many years, the outstanding amount can grow significantly and eat into your maturity. Best practice is to at least pay the interest regularly to keep the loan amount from growing.

Loan vs Surrender — Why Loan Wins

Factor🏦 Loan Against Policy❌ Surrender
Policy StatusActive ✅Terminated ❌
Life CoverContinues ✅Gone ❌
Bonus AccrualContinues ✅Stops ❌
Cash You Get (SV ₹3L)₹2,70,000 ✅₹3,00,000
Future MaturityYes (minus loan) ✅Nothing ❌
Cost~9-10% interestLose 30-70% of value ❌

💡 Expert Tip (Haresh Hirapara): A policy loan is the smartest way to access cash from your LIC policy. I always advise clients to take a loan instead of surrendering — you keep your life cover, your bonus keeps growing, and the interest rate is among the lowest in the market. Even if you can't repay the loan fully, the maturity amount will be far more than what you'd get from surrendering today. Consult your LIC branch for the exact loan amount available on your specific policy.

🧮 Check Your Surrender Value (Loan Base) →

Frequently Asked Questions

How much loan can I get against my LIC policy?+
Up to 90% of the surrender value of your policy. The policy must have completed at least 3 years of premium payments. For example, a policy with ₹3L surrender value can get up to ₹2.7L as loan. Contact your LIC branch for the exact amount.
What is the interest rate on LIC policy loan?+
Approximately 9-10% per annum, compounded half-yearly. This is significantly lower than personal loans (12-20%) and credit cards (24-42%). The exact rate may vary by policy type and issue date. Contact your LIC branch for the applicable rate.
How to apply for a loan against LIC policy?+
Visit your LIC branch with the original policy bond, loan form (5188), ID proof, and cancelled cheque. The loan is disbursed in 5-7 working days via NEFT/RTGS. No processing charges, no CIBIL check required.
Do I need to repay the LIC policy loan?+
Repayment is completely flexible — no fixed EMIs. You can repay anytime (full or partial) with no prepayment penalty. If you don't repay, the loan + interest is automatically deducted from the maturity or death benefit. However, it's recommended to at least pay interest regularly to prevent compounding.
Is loan against LIC policy better than surrendering?+
Yes, almost always. With a loan, your policy stays active (life cover + bonus continue), you pay only 9-10% interest, and you still receive maturity benefit (minus loan). With surrender, you lose everything — life cover, bonus, future maturity. A loan should always be considered before surrendering. Consult a financial advisor for your specific situation.
⚠️ Disclaimer

This article is for educational and informational purposes only. LIC-Calculator.com is not affiliated with LIC of India. Interest rates, loan amounts, and procedures are approximate and may vary by policy type and LIC branch. For exact details, contact your LIC branch or call 1800-2579 (toll-free).

This is not financial advice. Please consult a certified financial advisor before taking any loan decisions.

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