Credit Card vs Personal Loan vs Life Insurance Policy: Want loans at 2-3%? This explainer will help

The interest rate charged on the personal loan could be anything between 11% to 24%, or even more. You will also need a good credit score for getting a personal loan approved by your bank. Also, the personal loans are available for a fixed, short duration of 1 to 5 years. (Pixabay)

Just like a personal loan, the interest rate on credit card loan is also very high, mostly over 15% for a fixed short duration of just a few years. Moreover, if you miss paying the monthly EMIs, the total amount you end up paying to the bank may escalate beyond your imagination. (Pixabay)

Getting loan on a life insurance policy is a good alternative to the credit card or personal loan. The official LIC website says, "In case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value. Besides, a life insurance policy is also generally accepted as security, even for a commercial loan."(Pixabay)

On credit cards, banks often offer loans for a shorter duration at high rates. For personal loans, you need to submit documents like salary documents, housing certificates, PAN cards, etc. However, getting a loan on a life insurance policy can be possible by submitting just the policy document. (Pixabay)

Loan on life insurance policies can be availed at easy interest rates of 9 to 10 per cent. The policy works as the guarantee. You can get loans on some Ulips but not on the term insurance policy. (Pixabay)

Suppose, the return on your insurance policy is 7-8% per annum and the on the loan, you have to pay 9-10% interest. If you subtract what you are getting from what you are paying, the actual rate at which you will be paying to the insurer would be just 2-3%. (Pixabay)

While on personal loan and credit card-based loan, you have to pay back in a very short span of time, you can repay the loan on insurance policy over the entire policy term. (Pixabay)