Loan Against LIC Policy — Interest Rate, Eligibility & Process
8 min read · July 2026 · By InGrowIQ Team
If you hold an LIC endowment policy that is more than two years old, you are sitting on the cheapest loan available to most Indians — and there is a good chance nobody ever told you. No credit score check, no processing circus, interest far below any personal loan, and your life cover stays fully intact. Here is exactly how it works.
How much can you get?
Estimate your eligible loan amount and interest savings in 30 seconds.
Who is eligible
✓ Your policy has surrender value
Traditional plans (endowment, money-back, whole life) acquire surrender value after 2 full years of premiums. That's the gate — no surrender value, no loan.
✓ The plan type allows loans
Most traditional LIC plans do. Pure term plans don't (they have no surrender value), and ULIPs follow different rules.
✓ You are the policyholder
The loan is against your own asset — no guarantor, no income proof, no CIBIL check, and the loan doesn't appear on your credit report.
How much you can borrow
Up to 90% of your policy's surrender value (85% if the policy is paid-up). Note carefully: it is a percentage of the surrender value, not the sum assured. A ₹10 lakh policy with 5 years of premiums paid might have a surrender value around ₹2–2.5 lakh — so the loan would be roughly ₹1.8–2.2 lakh. The longer you have paid, the bigger both numbers get. Not sure of your surrender value? Use our surrender value calculator first.
The interest rate — where this gets good
LIC policy loan rates have typically been in the 9–10.5% per annum range, billed half-yearly. Compare the annual interest on ₹2 lakh:
And unlike an EMI product, repayment is flexible: you can pay just the interest and settle the principal whenever you like — LIC simply deducts any outstanding amount from your eventual maturity or death claim.
How to apply
Online — LIC Customer Portal
Log in at licindia.in → e-Services. If your policy is enrolled and NEFT details are registered, you can request the loan online and the amount credits to your bank account, often within a few working days.
Offline — your LIC branch
Carry the original policy bond, ID proof, and a cancelled cheque. Fill the loan application; the policy is assigned to LIC as security until repayment.
Through your agent
Any good agent will handle the paperwork with you — and check whether a loan actually beats your alternatives first.
The one risk you must manage
If your outstanding loan plus unpaid interestever grows beyond the policy's surrender value, LIC has the right to foreclose the policy — you would lose the cover and the policy ends. This only happens when people ignore the interest for years. The rule is simple: always pay at least the half-yearly interest, and the policy is never at risk.
Loan vs surrender vs paid-up — which one?
You need cash but the policy is worth keeping
→ Policy loan — cover continues, no loss locked in
Premiums have become unaffordable, no cash crunch
→ Make it paid-up — stop paying, keep reduced cover to maturity
Young policy (2–4 yrs) and you'll invest the difference better
→ Surrender may make sense — run the numbers first
Full breakdown of the exit math in our LIC surrender value guide.
Quick answers
For insurance agents
When a customer asks for money, they're one branch visit away from surrendering. Agents who know the loan option keep the policy — and the relationship. InGrowIQ keeps every policy and follow-up organised so you're always the first call.
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