Taking a Life Insurance Loan
What is the purpose of getting life insurance?
Getting life insurance is a good way of protecting your loved ones financially if you die. In South Africa, where many households have a single breadwinner or source of income, there is a big risk of facing financial difficulties when the breadwinner dies.
For this reason, it may be quite helpful for individuals to get life insurance. This type of insurance gives families peace of mind when their loved ones have passed on. They are able to have a sustainable source of income to assist them with basic household needs and expenses for a period of time.
While you are committed to paying monthly premiums towards your life insurance, you also have the option of taking a life insurance loan against your policy.
How does this work?
- You first need to start by determining whether your policy qualifies as a loan source or not. You need to check to see which kind of life insurance policy you have.
- You need to verify a cash value available for the loan.
- It’s important to weigh the benefits of this loan versus getting a conventional loan
What are the benefits of taking a life insurance loan?
It is a lot easier to access
In comparison with conventional personal loans, getting access to this type of loan is often much easier.
There is no loan application process
You don’t have to go through any complicated loan application processes
No need to check your credit history
You don’t have to worry about having to undergo any credit checks
You get to borrow against your own money
You are borrowing against your own money, so you aren’t considered to be a high risk individual
You may get lower interest rates
This goes back to your risk factor – it’s your own money, so you may not have high interest rates to contend with
