LIC Personal Loan Interest Rate

Please Note: LIC is not a Paisabazaar partner. Offers would be from partner Banks/NBFCs only.

Life Insurance Corporation (LIC) is the largest insurance company in India and apart from various insurance products it also offers its policyholders the option to avail personal loans against their insurance policies. These secured personal loans against LIC policy are available at an interest rate starting at as low as 9% p.a. and come with a repayment tenure ranging up to 5 years. You can avail a loan amount up to 90% of the policy’s surrender value to meet various personal financial needs, such as medical expenses, marriage, higher education, etc.

Interest Rate	Starts from 9% p.a.
Loan Tenure	5 years
Loan Amount	90% of the policy’s surrender value
Pre-payment Charges	Nil
Foreclosure Charges	Nil

Personal Loan offers from Paisabazaar

*Applicable for selected customers

 

LIC Personal Loan Interest Rates

LIC personal loan interest rate starts as low as 9% p.a. However, the personal loan interest rate applicable to a particular applicant varies with the person’s individual applicant profile including the person’s income level, nature of employment, loan amount and tenure desired, etc.

To compare personal loan interest rates of top banks/NBFCs – Click here

LIC Reducing Balance vs Flat Balance Interest Calculation

When interest payable on a personal loan is calculated using flat rate or flat balance method of interest calculation, it involves calculating interest on the entire loan principal amount throughout the loan tenure without taking into account the portion of the principal that has already been paid. The fact that the outstanding loan principal amount gradually decreases as monthly EMIs are paid is not taken into consideration by this method.

Contrary to this, the reducing balance method involves calculating interest only on the outstanding loan principal amount every month. Thus, as the outstanding loan amount decreases every month, the interest payable also decreases. Therefore, you will save on the total interest payout of the loan when interest is computed using reducing balance interest rates. LIC makes use of the reducing balance method to calculate the interest payable on its personal loans.

EMI Calculation Using Reducing Interest Rate

Given below is a sample of EMI calculations using Paisabazaar’s personal loan EMI calculator (based on the reducing balance method) taking different loan amounts, tenures and interest rates into consideration:

EMI Calculation Using Flat Interest Rate

Given below is a sample of EMI calculations using the flat balance method taking into account different loan principal amounts, loan tenures, and loan interest rates into consideration:

LIC Personal Loan Interest Calculation

LIC personal loan interest rate starts at 9%. The following table gives a sample of the total interest payout, the total amount repaid and the proportion of interest in the total amount repaid for different LIC personal loan amounts, interest rates, and tenures.

How to Get Low-Interest Rates on LIC Personal Loan?

Given below are a few tips that could help you avail a lower rate of interest on your LIC personal loan:

• Working with a reputed organization and having a stable job and employment history
• Timely payment of your credit card dues and EMIs
• Having a good existing relationship with the lender
• Reduce your existing debt

Factors Affecting Personal Loan Interest Rates

Here are a few important factors that affect LIC personal loan interest rate:

• Income Level: The applicant’s income often influences the interest rate charged by the lender. Applicants with higher annual incomes are often charged a lower rate of interest on personal loans as they are perceived to have a better repayment capacity and are less likely to default on repayments and vice versa.
• Employment Details: Applicants working with reputed organisations and having a stable job and history of employment may be offered a lower rate of interest on personal loans. The interest charged by the lender is also often influenced by the nature of employment of the applicant- whether the person is salaried or self-employed.
• Relationship with LIC: Having a good existing relationship with LIC – paying your policy premium on time, etc. may help you avail a lower rate of interest on your personal loan.
• Loan Amount and Tenure Desired: Usually, higher loan amounts and longer repayment tenures come with higher rates of interest and vice versa

FAQs on LIC Personal Loan

What is the maximum amount that can be availed against a LIC policy?

Ans. The maximum amount that can be availed against a LIC policy will be 90% of the policy’s surrender value. However, in the case of paid-up policies, where premiums are not being paid anymore, you can avail a loan amount up to a maximum of 85% of the policy’s surrender value.

How quickly can the loan be repaid?

Ans. The minimum time for loan repayment is 6 months. Even if the applicant wishes to prepay the loan, they will have to pay interest for a period of 6 months.

Can multiple loans be taken against a single LIC policy?

Ans. Yes, a second loan can be taken even if the first loan has not been paid, subject to the terms and conditions specified by the Life Insurance Corporation (LIC) of India.

What happens if the policy matures or is claimed within the loan repayment period?

Ans. If the policy matures or is claimed within the loan repayment period, then the interest amount has to be paid till the date of maturity.

How will interest be calculated in case the policyholder dies?

Ans. If the policyholder passes away, interest will be calculated till the date of the person’s death.