Insurance Regulatory Development Authority of India (IRDAI) has decided to discontinue the facility of repayment of insurance policy loans using credit card as a means of payment.
If you have taken a loan on LIC's policy and pay the EMI of the loan through a credit card, now you will not be able to do so. Because IRDAI is going to close the option of repayment of loan taken on insurance policy from credit card. IRDAI has directed all life insurers to stop using credit cards for repayment of loans against insurance policies.
IRDAI has decided to discontinue the facility of repayment of loans taken against insurance policies using credit cards as a mode of payment. All life insurers are advised to stop acceptance of credit cards as a mode of repayment of loans against insurance policies with immediate effect. In August 2022, the Pension Fund Regulatory and Development Authority (PFRDA) had announced that it will stop accepting credit card payments for subscription and contribution to National Pension System (NPS) Tier-II accounts.
Loan against insurance policy
Customers can avail loans by pledging their insurance policies. Taking this type of loan is beneficial for the borrowers as no other asset is required. You can borrow money from your life insurance policy as an alternative to taking a personal loan or credit card loan. The loan amount is determined by the value of your policy. The interest rate charged on this loan, as well as the loan repayment options, differ depending on the insurers.
Loan cannot be taken on all types of policies
Be informed that you cannot take a loan against all types of life insurance policies. Hence it is better to check with your insurance company before purchasing the plan. But policies like whole life policy, money-back policy, savings plan and endowment plan provide loan against life insurance policy. Sometimes a loan against a ULIP policy, also known as a Unit-Linked Insurance Plan (ULIP), can be availed depending on your insurer.
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