Kolkata, June 19:We are living through the worst pandemic. The lockdown and the economic slowdown have affected jobs and salaries severely. While we can expect the situation to limp back to normal, many of us are in urgent need of cash to tide over these uncertain times.

Sources of cash like personal loans are easy to avail but come with very high interest rates. In such a situation, you can take a loan against some of your assets. When we think of life insurance policies, we think of protection, but you can also get a loan against a life insurance policy.

First, you need to understand that loans are available only against certain types of life insurance policies. You can take a loan against the surrender value of permanent or whole life insurance. However, you cannot take a loan against term insurance. When the term insurance expires at the end of the term, it does not have any cash value, hence are not eligible for a loan. To avail a loan, you would need to pay your premiums on time for the last three years.

The amount of loan you can avail will also differ. The loan amount is mostly 85 to 90 per cent of the surrender value of traditional life insurance plans. ULIPs may or may not provide loan facilities. If they provide a loan it would depend on how much your corpus is worth currently.

The interest charged on a loan against life insurance is lower compared to an unsecured loan as the life insurance policy is the collateral. The rate of interest will also be lower if you have paid premium for a longer time. Interest rates would vary from 10 to 12 per cent. On the other hand, a personal loan charges interest from 12 to 18 per cent. Hence, look at the options before you avail a loan.