Education Loan Against LIC Policy - Complete Guide

Did you know that Life Insurance Corporation (LIC) policies that protect you and your loved ones financially during unfortunate events can also help you secure education loans when needed? An education loan against LIC insurance policy is a sort of secured education loan where the borrower pledges an LIC policy as a collateral to the lender. This safeguards the borrower's assets, such as property or automobiles, to the lender in order to keep ownership. However, before applying for an LIC education plan, let’s understand how it works.

What is an Education Loan Against LIC Policy?

An education loan against LIC policy is a type of secured loan where an individual can use their LIC policy as collateral to avail of a loan for education purposes. This allows students or parents to access funds needed for tuition fees, books, accommodation, and other education-related expenses. To understand how education loans against LIC policies work, here is an example.

Suppose you have an LIC endowment policy with a sum assured of INR 5,00,000 and a surrender value* of INR 2,50,000. You may be eligible to get a loan of up to 70% (INR 1,75,000) of this surrender value for funding educational purposes. The loan can be repaid in EMIs over a period, with interest calculated based on the prevailing rates.

*Surrender Value - If a policyholder chooses to cancel or "surrender" their life insurance policy before it matures, they will get the surrender value from the insurance provider. In simple terms, it is the amount of premiums paid that, in the event that the policy is voluntarily terminated before the conclusion of the term, can be reimbursed to the policyholder, less any relevant fines, fees, or unpaid loan balances.

Key Features of Education Loan Against LIC Policy

As an education loan against an LIC policy is a secured education loan therefore, the features of loan against insurance policy LIC India are similar to collateral-based loans. Hence, they can be an effective way to fund your education. Below are listed the features of education loan against LIC policy.

Eligibility Criteria of Education Loan Against LIC Policy

To avail of an education loan against LIC policy, the borrower must fulfill the below listed eligibility criteria.

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  The applicant must be an Indian citizen.
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  The applicant must be at least 18 years of age.
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  The LIC policy must have a guaranteed surrender value.
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  The applicant must have a valid LIC policy.
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  The applicant should have paid at least 3 years’ premium in full for the LIC policy to avail the loan facility.

Top 8 LIC Policies Plan Eligible for Secured Education Loans

Many borrowers are under the misconception that all LIC policies can act as a collateral for education loans. Well, that’s not the ground reality. Not all LIC policies have an education loan facility. In fact, policyholders must choose an LIC policy plan that specifically offers an education loan feature. Below are listed some of the top LIC policies that are eligible for an education loan against LIC policy.

• 
  Jeevan Pragati
• 
  Jeevan Labh
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  Single-Premium Endowment Plan
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  New Endowment Plan
• 
  New Jeevan Anand
• 
  Jeevan Rakshak
• 
  Limited Premium Endowment Plan
• 
  Jeevan Lakshya

How to Apply for Loan Against LIC Policy?

To apply for an LIC education plan loan, borrowers can apply either online or offline. Please note, that the application process for loan against an LIC policy is subject to change.

Offline Method - To get a loan against a LIC insurance offline, follow the steps mentioned below:

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  Step 1: Visit the nearest LIC branch and complete the loan application form.

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  Step 2: Fill out the application with your policy details and any relevant information. Attach KYC documents such as identity and address proof.

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  Step 3: Submit the application form in the branch, along with the original policy bond.

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  Step 4: The LIC office will check your policy information, premium payment status, and surrender value to assess your loan eligibility.

If approved, LIC will sanction the loan and disburse the funds according to the product terms. LIC will retain the original policy till the debt is fully repaid.

Online Method - To get a loan against a LIC insurance online, follow the steps mentioned below:

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  Step 1: Sign up for LIC e-services and log in to your account.

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  Step 2: Check your policy eligibility for a loan and examine the appropriate terms and conditions online.

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  Step 3: Fill out the online application form and submit it with scanned copies of your KYC documents.

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  Step 4: You may need to send genuine physical documents to your nearest LIC branch for verification.

Once verified and approved, the funds are transferred to your account. 

 Note - The required policy documents have to be deposited in tangible form at the branch.

Documents Required for Loan Against LIC Policy

To apply for an education loan against an LIC policy, borrowers must submit the following list of documents along with the application form.

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  LIC policy document and surrender value statement.
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  Proof of admission to the educational institution (for education loans).
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  KYC documents like Aadhar, PAN, address proof, and bank statements.
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  Income proof of the borrower (if required).

Please note that this is not the full list of required documents as the exact list may differ from borrower to borrower. To get a customised document checklist specially designed for you, check your loan eligibility now.

Must Know Facts about Education Loan Against LIC Policy

Before applying for an education loan against an LIC policy, students must know the must known but lesser known facts about LIC education plan.

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  The education loan has a minimum tenure of six months. Shorter tenures are not allowed.
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  Prepayment of the loan is permitted only after payment of at least six EMIs.
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  If the policyholder dies before the loan matures, interest will be levied only until the date of the demise.
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  If the policy matures during the loan term, LIC can use the maturity claim to collect the existing debt plus interest.
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  Only LIC policyholders with qualified endowment, moneyback, and whole-life policies are eligible for loans after earning the stipulated surrender value.
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  To avoid loan foreclosure, the policyholder must pay interest on time as scheduled. 
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  The rights to terminate the policy if the loan with interest exceeds the surrender value is reserved with LIC itself. 
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  LIC uses the LIC insurance policy as security for the loan. If the applicant doesn't make loan installments as agreed, LIC has the right to refuse coverage or cancel the policy.
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  Before paying the remaining sum to the policyholder, LIC may take the outstanding loan balance from the insurance proceeds if the policy matures before the loan is fully repaid.

An education loan secured by a LIC insurance can be an effective financial option for students and parents seeking to pay higher education without depleting their savings. Since it is a secured loan, borrowers can enjoy lower interest rates and more flexible repayment options, making it an appealing alternative to standard school loans.

For students seeking hassle-free loan approval, GyanDhan is the best solution. By leveraging their extensive network of lending partners, we ensure that students secure the best possible loan terms, reducing financial stress and helping them focus on their academic aspirations. Check your education loan eligibility with GyanDhan today and take the first step toward your dream education!

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