LIC Loan Repayment: How To Pay Online, Interest Rates And Rules

Over 65 years, LIC policies have been one of the most trusted and stable ways to save money in India. But do you know that you can also take out a loan against your LIC policy in case of an emergency? 

Instead of taking personal loans with interest rates as high as 18%, LIC loans are a far better option. 

In this blog, you will know more about the LIC loans repayments, interest rates and rules. 

What Is A LIC Policy Loan

A LIC policy loan is a secured loan that you can avail against your life insurance policy’s surrender value. It is the total amount saved in the policy. 

Your LIC policy will be used as security until you repay the loan. 

Some key aspects of the LIC policy loan rules are 

• Active policies with paid premiums up to 3 years are eligible for LIC loans. 
• 90% of the surrender value can be taken as a loan amount. 
• Interests are generally 8 to 10 per cent per annum. 

LIC Loan Interest Rates

The LIC loan interest rates are lower than those on personal loans. This is because they are secured by the policy amount. Interest rates typically range between 8 % to 12%, and these rates are revised periodically by LIC. 

Factors affecting the Interest rates in the LIC policy are:

1. Policy Type - Traditional policy plans like Endowment or Money Bank with larger surrender value offer better loan value than the term plans. 

2. Loan amount and Tenure - A higher loan amount with a longer tenure can increase risk, which directly affects the interest rates. 

3. Surrender Value - The loan amount depends on the surrender value of the policy. That value depends on the premium paid and the policy age. 

4. Market Trends - Interest rates in LIC policy are fixed; however, economic changes can influence the rates over time. 

How To Repay LIC Loans?

The repayment option for the LIC loans is flexible. These are the options you can choose while repaying the LIC loans.

• You can pay the interest regularly and the principal amount later.
• Pay both the interest and principal amount altogether.

Failure to pay the interest amount on time results in interest being added to the principal amount, or it may be deducted from the policy. To repay the LIC loans, choose any step.

Pay Direct Option

Open the LIC official website and click on the Pay Direct option.  Now, click on the Repay loan option and enter your customer login ID and password for LIC loan repayment online.

Pay Through Customer Portal

Another option is Pay Through Customer Portal, and by logging in through OTP, QR scan or customer ID, you can pay the loan easily. 

Offline Repayments

Visit the nearest LIC branch and pay via cash, cheque and DD for offline repayments. This is a convenient option for people who do not know how to pay online. 

Consequences Of Non-Repayments

There are some major consequences for ignoring the LIC loan repayments.

1. More Interest

The unpaid interest will keep on adding, increasing the overall debt. The interest amount should be paid on time to avoid any extra interest. However, you can pay the principal amount later. 

2. Deduction From Maturity

The Unpaid interest amount is added to the principal amount, which will ultimately reduce the maturity of the policy. There will be no death benefits received after the unpaid interest. 

3. Policy Foreclosure and Loss Coverage

If the total loan amount with the interest surpasses the total surrender value in the policy, this will result in policy foreclosure. You will also lose the insurance if the policy is foreclosed. 

4. Impact on Credit Score

When repayments are not paid on time, this can affect your credit score. A lower credit score can reduce your chances of getting loans in future. 

Should You Take a Loan Against LIC

Taking a loan against LIC can be a smart decision if you keep all the pros and cons in mind. 

Pros

• LIC loans offer lower rates than many personal loans. The policy value acts as collateral for the loan amount. 
• The loan approval depends on your policy value and not on your credit scores. So even if you have an average credit history, you can still apply for this loan.
• The approval of LIC loans is faster and with minimal documentation. 
• Even after the loan, the policy stays active, and insurance coverage is uninterrupted as long as you pay the premium on time.

Cons

• The loan value is limited to the surrender value of the policy. It cannot exceed the surrender value of the policyholder. 
• Unpaid interest can reduce the maturity value of your policy. Therefore, paying the interest on time is important. 
• If the loan is not repaid for a long time, your policy will be foreclosed. 

Conclusion

LIC loans can be a practical solution during financial emergencies, offering relatively lower interest rates and flexible repayment options compared to unsecured loans. However, they are not entirely risk-free. Delayed repayments can increase your overall liability, reduce your policy’s maturity value, or even lead to policy foreclosure.

Before opting for a loan against your LIC policy, it is important to understand how repayment works, evaluate your ability to service the interest, and assess whether it aligns with your financial goals. Used wisely, it can provide short-term liquidity without disrupting long-term financial security.

For investors looking to diversify beyond traditional options, platforms like Grip Invest offer access to curated fixed-return opportunities, helping you balance liquidity needs with steady income potential.

FAQs On LIC Loan Repayment

Author: Grip Invest Editorial Team The Grip Invest Editorial Team is a group of Chartered Accountants, MBA (Finance) graduates, and Qualified Research Analysts dedicated to helping you invest smarter. We dive deep into India's fixed income landscape to deliver content that is accurate, up-to-date, and easy to understand. Whether you're exploring bonds, fixed deposits, or other fixed income opportunities, our guides cut through the noise and give you the clarity to make better financial decisions.

Want to stay at the top of your finances? 

Join the community of 4 lakh+ investors and learn more about Grip Invest, the latest financial knick-knacks, and shenanigans in the world of investing.

Happy Investing!

Disclaimer - Investments in debt securities/municipal debt securities/securitised debt instruments are subject to risks including delay and/ or default in payment. Read all the offer related documents carefully. The investor is requested to take into consideration all the risk factors before the commencement of trading.
This communication is prepared by Grip Broking Private Limited (bearing SEBI Registration No. INZ000312836 and NSE ID 90319) and/or its affiliate/ group company(ies) (together referred to as “Grip”) and the contents of this disclaimer are applicable to this document and any and all written or oral communication(s) made by Grip or its directors, employees, associates, representatives and agents. This communication does not constitute advice relating to investing or otherwise dealing in securities and is not an offer or solicitation for the purchase or sale of any securities. Grip does not guarantee or assure any return on investments and accepts no liability for consequences of any actions taken based on the information provided. For more details, please visit www.gripinvest.in

Registered Address - 106, II F, New Asiatic Building, H Block, Connaught Place, New Delhi 110001