Now you will not be able to repay the loan taken on the insurance policy through a credit card. IRDAI i.e. Insurance Regulatory Development Authority of India has banned this. IRDAI has recently issued a circular regarding this.
According to the latest circular, if someone has taken a loan on an insurance policy, then he will not be able to pay it through a credit card. IRDAI has implemented this instruction with immediate effect.
Why was this decision taken?
The old system caused loss to the policyholders. Consumers get one month to repay the loan through a credit card. In this, they get an interest-free loan, but if they are unable to pay the credit card bill on time, then they have to pay a lot of interest. That is, they get trapped in a debt trap again.
According to the decision of IRDAI, now consumers will neither be able to use credit cards to repay the loan nor will they get trapped in the debt trap.
The insurance regulatory body has taken this decision under Section 14 of the IRDA Act, 1999, and has asked all insurance companies to follow the instructions with immediate effect.
PFRDA has also banned
Before IRDAI, PFRDA i.e. Pension Fund Regulatory and Development Authority had also taken such a decision last year. In August 2022, PFRDA banned contributions from credit cards in Tier-2 of the National Pension Fund (NPS).
The loan is available on the insurance policy
Loan on an insurance policy is one of its many benefits. If you have taken any kind of life insurance policy, then you can take a loan up to 90% of the surrender value. Compared to a personal loan, a loan on an insurance policy is available quickly and the interest rate on it is also low.
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