How exactly does that work? If I have a 25K policy does that mean I can borrow that much for the bank or what?
2007-09-01 13:28:22 · 8 answers · asked by V for Vendetta 1 in Business & Finance ➔ Personal Finance
You can NOT use your life insurance policy as a collateral to get a bank loan. Why? Your life insurance is not an asset, but an expense. To secure a bank loan, you would need something of value such as real estate, your car, precious metals, or home equity or anything of high value. That way your bank can claim possession on these things in case you default on your loan.
If you have $25,000 of cash value in your life insurance policy, you can borrow it and use the money for anything you want, but you still can't use it as a collateral. When you die, the insurance company keeps all your cash value and your beneficiary gets paid the death claim. So the bank won't get anything from your life insurance.
2007-09-02 18:41:05 · answer #1 · answered by Anonymous · 2⤊ 0⤋
You cannot use your current policy as collateral for a loan. Occasionally cash value in a policy will help you qualify for a loan because it is an asset.
Also, sometimes when you take out a loan the lender will require you to purchase a policy, which in essence is collateral securing their loan. This is the case in Private Mortgage Insurance. If the lender isn't entirely comfortable simply taking the collateral (your house in this example) they can require to purchase a policy to protect themselves should you die or become unable to earn an income.
2007-09-04 08:17:06 · answer #2 · answered by Anthony K 1 · 0⤊ 0⤋
If you have a life insurance policy with a cash value, you might be able to borrow on the insurance. Your policy should indicate what the interest rate would be and the cash value. But it wouldn't be anywhere near that $25K.
2007-09-01 14:07:06 · answer #3 · answered by bdancer222 7 · 0⤊ 0⤋
well are you bidding to have the company take you out just to collect the money. 25k is a tiny policy- you most likely have the cashvalue build up insurance- not term insurance. it never made sense to me to have my insurance company be my bank to save money for me unless I can get a better rate than my traditional bank. 25k policy- well if you are alone- no family, and no parents you dont need life insurance.
2007-09-01 16:43:35 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Think about it, you have to die and name the bank as beneficiary for that to be of any value to the bank. Some insurance companies allow borrowing the cash surrender value of the policy.
2007-09-01 13:33:21 · answer #5 · answered by Anonymous · 2⤊ 0⤋
It relies upon on the variety of existence insurance which you have and if it builds funds fee. notwithstanding if this is a UL or VUL coverage they generally will build funds fee which would be borrowed against at very low expenditures. the 1st element you are able to prefer to ascertain is what variety of existence insurance this is. notwithstanding if this is a term coverage with a stated volume, they gained't build funds fee and you are able to not borrow funds against it.
2016-11-13 23:04:31 · answer #6 · answered by ? 4 · 0⤊ 0⤋
Nope, not unless you have a cash value built up in the policy, check with your agent.
2007-09-01 13:31:53 · answer #7 · answered by Anonymous · 1⤊ 0⤋
no it has nothing at to do with that
2007-09-01 13:33:14 · answer #8 · answered by so curious 3 · 0⤊ 0⤋