LIC Loan Against Policy Calculator (LAP Arbitrage)
Evaluate instant liquidity against your LIC policy. Calculate maximum borrowing eligibility, half-yearly simple interest servicing, interest saved versus unsecured personal loans, and capital protected against destructive policy surrenders.
Policy & Loan Inputs
3-Way Liquidity Decision Matrix
Option A: Policy Loan
- Rate: 9.5% p.a. simple
- Outflow: ₹5.78 L
- No fixed monthly EMI pressure
- Zero CIBIL / income proof
- Life cover & bonuses intact
Option B: Surrender
- Instant cash: ₹5.00 L
- 40%–60% capital haircut
- ₹15 Lakh life cover lost
- Future terminal bonuses wiped out
- Irreversible decision
Option C: Personal Loan
- Rate: 14.5% p.a. reducing
- Monthly EMI: ₹15,488 / mo
- Total Outflow: ₹5.58 L
- 1%–2% processing fees + GST
- Strict CIBIL 750+ & salary slip checks
If you pay zero interest, your unpaid compound debt will take approximately > 10 Years to exceed your surrender value.
Advisory: Always service at least the half-yearly interest of ₹21,375 every 6 months. This prevents interest capitalization and guarantees your policy will never lapse or face foreclosure.Total Interest Burden Comparison
Over Chosen TenureHalf-Yearly Interest Servicing Schedule
9.5% Simple Interest| Cycle (6 Mos) | Year | Interest Due | Outstanding Principal | Cumulative Interest |
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Everything You Need to Know About Loans Against LIC Policies
Facing a temporary cash crunch or medical emergency often prompts Indian policyholders to consider surrendering their traditional life insurance policies. However, surrendering an endowment or money back plan causes catastrophic capital destruction—surrender value factors typically return only 35% to 60% of total premiums paid after substantial administrative deductions, while completely wiping out the accrued bonuses and leaving the family stripped of life cover.
The Loan Against LIC Policy (LAP) facility provides an actuarially sound escape hatch. Governed by Section 5196 guidelines of the Life Insurance Corporation of India, policyholders can unlock up to 90% of their net surrender value within 3 to 5 working days at a moderate 9.5% p.a. simple interest rate without undergoing cumbersome credit checks, CIBIL score evaluations, or income proof verifications.
Key Advantages of LIC Policy Loans
- Zero Credit Bureau Checks: Approval is 100% collateral-backed by the policy's existing surrender cash value. Low or zero CIBIL scores do not affect eligibility.
- No Fixed Monthly EMI Stress: Borrowers are not bound by rigid monthly reducing EMIs. You are only required to service the simple interest every 6 months.
- Principal Repayment at Will: You can pay back ₹5,000, ₹50,000, or clear the entire balance anytime without prepayment penalties or foreclosure charges.
- Retained Life Cover & Bonuses: Your full basic sum assured and ongoing annual simple reversionary bonuses continue to accumulate uninterrupted.
Step-by-Step Procedure to Apply (Form 5196)
- Step 1: Check Loan Quotation: Visit your servicing LIC branch or log into the LIC Customer Portal / MyLIC App under "Online Loan" to view your exact eligible loan amount.
- Step 2: Complete Forms: Fill Form 5196 (Loan Application) and Form 5205 (Deed of Assignment). The assignment transfers security rights to LIC until the loan is discharged.
- Step 3: Submit Original Policy Bond: Submit the physical policy bond along with a cancelled cheque with the policyholder's printed name, PAN card, and Aadhaar card.
- Step 4: Direct NEFT Credit: Upon branch processing, loan proceeds are credited directly into your registered bank account via NEFT within 48 to 72 hours.