What are the pros and cons of policy loans

Advantages:

1. Safety and security.

While the policy is valid, the customer can continue to enjoy the insurance protection stipulated in the policy during the loan period. Relatively speaking, the guarantor does not have to worry about losing protection due to surrender of the policy, and can avoid the loss of surrender charges.

2. Simple operation

The process of applying for a loan is very simple. The insured only needs to bring the insurance policy, ID card and a written statement of the insured's consent to the loan application to the insurance company. As long as the lender brings all the required information, the insurance company can usually complete the business on the same day.

3. The expected annual interest rate is low.

The expected annual interest rate on insurance company policy loans is relatively low. In addition, the expected annual interest rate for bank commercial loans with maturities of six months and less can be fixed or variable. Variable means that the expected annual interest rate of the policy loan changes with the market's expected annual interest rate. This provision of expected annual interest rates benefits policyholders, beneficiaries and insurance companies at the same time. It can prevent policyholders from obtaining policy loans from insurance companies to invest in products with higher returns when the market's expected annualized interest rates are too high. It can also enable insurance companies to increase the interest they receive from policy loans when the market expects annualized interest rates to rise, thus making up for their losses to a certain extent.

Disadvantages:

Although it is relatively simple to use policy loans, not all insurance products have this feature. And the loan amount is calculated based on the policy’s cash value, not the insurance premium.

1. Not all insurance policies can be loaned.

The most common life insurance, participating insurance and other insurances with savings nature. In addition to these products, common accident insurance, medical insurance, and term life insurance do not have loan functions. In addition, the terms of some insurance products also stipulate that loans cannot be taken if there is a premium waiver, prepaid premium or insurance that is applying for claims.

2. The loan amount is not calculated based on the premium.

The loan is based on the cash value of the policy, so the loan amount cannot exceed 80% of the cash value of the policy. The reason for the difference in amount is that the premium will accumulate into cash value after deducting various expenses, and the insurance cost of long-term life insurance products in previous years was relatively high.

Are policy loans reliable?

Policies with cash value can be used for loans. The cash value refers to the specific money that can be recovered when the policy is surrendered. Generally speaking, the policy loan amount can be higher than the cash value or 80% of the cash value, but some insurance products can loan 95% of the cash value. Insurance policies can be used for loans from banks, insurance companies, and other financial institutions. The interest rates vary depending on the loan amount.

Among them, bank loan interest is the lowest, with the general annual interest rate being more than 4 and less than 5. The interest rates of insurance companies are around 5-6, while the loan interest rates of other financial institutions such as online loan companies are very high, usually around 10-24. Therefore, the policy loan itself is a reliable form of loan, but the interest rates vary greatly depending on the loan channels. It is recommended to choose a bank or insurance company loan as much as possible.

What are the pros and cons of using an insurance policy loan?

The biggest advantage of using an insurance policy loan is that you can continue to enjoy the protection services stipulated in the insurance contract during the loan period, and the procedures for applying for a policy loan are It is also relatively simple. You only need the insurance policy, valid ID card, loan application, etc., and then submit it to the insurance company's business office.

When using an insurance policy for a loan, the annual interest rate of the loan is relatively low, and the time it takes to apply for a loan is relatively short. After the loan, the user can flexibly choose the repayment method. However, you must repay the loan according to the time stipulated in the contract, otherwise penalty interest will be incurred.

When using insurance policies for loans, not all insurance policies can be loaned. Generally, only policies with cash value can be loaned. When applying for insurance policy loans, the amount is not very large, and the loan is usually with cash value. Around 80, different insurance companies have different regulations.

In the first few years after insurance is purchased, the cash value of the policy is very small, and the loan amount will be very low at this time. Only when the cash value of the policy is relatively high can you have a higher loan amount. Therefore, if the cash value of the policy is not much, you can find other ways to borrow money.

What does policy loan mean? Take stock of the advantages and disadvantages of policy loans!

Policy loans are a loan method that has become increasingly popular in recent years. As long as the borrower holds a policy from an insurance company, he or she can obtain a loan. Many people are still relatively unfamiliar with policy loans. In fact, insurance companies such as Ping An have started similar loan services a long time ago. Let’s take a look at the advantages and disadvantages of policy loans!

1. Unique advantages of policy loans

1. The threshold is extremely low and no credit is required. Anyone who has purchased insurance can apply, and online loan users are not afraid either;

2. In addition to submitting proof of insurance, other application materials are very simple, just basic identity information;

3. Borrowing interest is calculated on a "day" basis, and you can only repay Interest, no principal repayment, reducing repayment pressure.

4. The payment is very fast, usually it takes 3-5 working days to arrive, second only to bank loans, and there are no other handling fees.

5. The loan interest rate is low. The interest rate for applying for policy pledge from insurance companies is generally the same as the basic interest rate of bank loans, which is relatively very low.

6. The loan limit ratio is high, and the maximum loan amount can be 80%. You must know that if you get a real estate mortgage loan, the down payment of 30% for the first home is now 70% of the property value. The proportion of stock pledge financing is even lower, with the main board stocks less than 70% and small and medium-sized enterprises generally only having 40%.

2. Disadvantages of policy loans

1. Many policy loans now accrue interest based on compound interest. If the borrower fails to repay overdue, the insurance company will include the interest in the principal. Gold, the so-called compound interest.

2. When the cash value of the personal insurance account is insufficient to repay the loan and loan interest, the insurance contract will be terminated.

3. Some borrowers purchase life insurance and critical illness insurance. Once the insured dies before the policy loan is repaid, the insurance payment will be reduced by the loan balance, and the benefits due will be significantly reduced. .

4. Once the loan is overdue, the policy will become invalid.

To sum up, policy loan is a very good loan type. Nowadays, most people are more aware of insurance and hold 1-3 different insurances on hand. If If you encounter financial constraints, you can also use your insurance policy to apply for a loan. What's more, you can even use your insurance policy loan to make money.