Women’s Finance Blog

Borrowing against a life insurance policy has become a popular option for people who need a loan, especially if they have bad credit or are unable to qualify for a loan through a bank. However, there are a couple catches to consider before you do this.

What are the fees?
There are often fees against the entire amount of the policy, even if you don’t borrow the entire amount. So check to ensure you won’t be paying more in the long run.

What is the interest rate?
Don’t assume they will charge the same rate as what a bank would.

Borrower Beware
When you borrow against your life insurance, it is not regulated in any way at all. Meaning, it is definitely a case of borrower beware. Make sure you read all the fine print and get clarification (preferably in writing) on anything you do not understand.

Paying it back
While you are not required to pay it back, do keep it mind that your life insurance policy will be depleted by whatever you borrow. But also be aware of any penalties or fees associated when you do decide to pay it back, as well as the interest.

If you should die
If you die while you have borrowed the entire amount of your policy, your family would be without any money from the policy, meaning your family could face a financial crisis if other considerations were not made.

Be sure to carefully consider these things when you do decide to borrow against your life insurance policy so you can prevent any problems in the future.

Filed under: Life Insurance