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Kotak e-Term Plan is a pure term plan that provides a high level of protection to your loved ones in your absence.
Kotak e-Assured Savings Plan not only provides affordable protection but also helps accrue wealth for accomplishing your upcoming financial aims by giving guaranteed benefits.
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You’ll often come across people talking about different types of loans in India, but rarely would you hear about a loan against insurance policy. One primary reason for this, is unawareness, and the other, India’s insurance penetration, which is well below the global average.
Loan against insurance policy, also known as pledging, is an extremely popular concept abroad. Such loans are issued by the insurance companies itself, or any other financial institutions that provide loans against securities. This type of loan bodes well for loan seekers as you don’t have to provide any other assets as collateral. Therefore, instead of taking personal loans or loans against your credits cards, you can choose to borrow money using your insurance policy. However, such loans are not available against term insurance policies or equity-oriented securities.
Besides this, here are a few more things you must know before you decide to opt for a loan against insurance policy in India:
Eligibility: People who hold a Life insurance plan and/or ULIPs (Unit Linked Insurance Plans) can apply for this loan. Unlike the traditional insurance policies, ULIPS offer life insurance risk covers that provide options to invest in areas like shares, stocks and bonds. Therefore, if you are planning to apply for a loan of this kind in the future, you must buy life insurance first.
Rate of Interest: The interest rate charged on this type of loan depends on the interest rate applicable at the time of taking the policy. The borrower has to pay interest for a minimum of 6 months even if the loan has been cleared before within this time frame.
Repayment: The repayment period is usually 6 months. But the terms and conditions of repaying your loan may vary based on your lender. For instance, some insurance providers do not require the borrower to pay the principal amount. Instead, at the time of maturity or claim, they directly credit it from the policy value, provided you are paying the interest amount on time.
Documents: To avail this loan, you need to fill a loan application form, which needs to be accompanied with the original insurance policy document. You will also need to attach a copy of a cancelled cheque and a payment receipt for the loan amount.
While there are various benefits attached to this policy, one notable feature is that interest rate on this type of loan is much lesser than on a personal loan. Also, unlike unsecured loans, there’s a slim chance that your loan application will get rejected.
Opting for this type of loan is a hassle-free process and the repayment options are far more flexible too. It can also make a big difference to the lives of the dependents. This is because in the event the policyholder passes away during the tenure of the loan, the outstanding loan amount will be deducted from the policy and the balance will be handed to the nominee.
Thus, before you plan to avail this type of loan, you are recommended to speak to an insurance advisor so that you can fully understand the terms and conditions of the loan. This will make you well aware of the short-term and long-term risks attached to it.
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