LIC Loan Interest Calculator

Most conventional retail banking institutions calculate and compound interest on outstanding loans monthly. In contrast, loans taken against active insurance policies from the Life Insurance Corporation of India (LIC) compound interest strictly **half-yearly (semi-annually)**.

Interest falls due every six months from the date of loan disbursement. If interest is not paid within the due date or grace period, it is added to the principal balance (capitalized), causing interest to accrue on the outstanding interest in the subsequent compounding period.

Recommendation: To keep your policy's outstanding debt from expanding, pay the simple interest component every six months. This avoids capitalization completely.

LIC offers policyholders a standard **30-day grace period** for servicing loan interest payments. No penalty or overdue surcharge is levied if interest is paid within these thirty days.

If interest is delayed beyond the 30-day grace limit, LIC levies an overdue penalty surcharge of **2.00% per annum** on the unpaid interest component, calculated specifically for the number of overdue days.

One of the most user-friendly characteristics of an LIC policy loan is the complete **absence of prepayment penalties or foreclosure charges**.

Borrowers are free to make partial principal prepayments (minimum ₹10,000) at any time. When a prepayment is processed:

• •Accrued Simple Interest: Interest accumulated up to the exact date of prepayment is paid first.
• •Principal Reduction: The remaining prepayment amount directly reduces your outstanding loan principal.
• •Recalculation: Interest in the subsequent billing periods is calculated strictly on the reduced principal balance, yielding massive compound interest savings.

Because your life insurance policy itself serves as the security, you do not need to provide salary slips, credit score reviews, or property documents to secure an LIC policy loan.

LIC policy loan interest repayments do **not** attract tax benefits under Section 80C or Section 24(b) under standard criteria.

However, if you can documentarily prove to the Income Tax authorities that the loan proceeds were utilized exclusively for home construction or purchasing residential property, you might claim interest deductions under **Section 24(b)** up to ₹2 Lakhs per annum.