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Coming up with collateral to use in backing a business loan can be difficult when you’re first starting out. The loan you’re looking for might be to merely get your business on its feet, or your industry might not include the valuable equipment traditionally used as collateral.
You have options to consider for collateral outside of equipment and real estate. Find out what you need to know about using life insurance as collateral for a business loan, including what to watch out for.
The short answer is yes, some business loans accept life insurance as collateral. Some lenders for SBA loans even suggest that you have a life insurance policy to back it.
When you use a life insurance policy as collateral, you designate that the lender can collect some or all of the policy during the life of the loan. If something were to happen to you while there’s still a balance on the loan, the lender could make a claim against your policy.
Nobody likes to dwell on the inevitable. But you may be able to secure a business loan with your life insurance policy by completing a collateral assignment form.
This form doesn’t designate the lender as a beneficiary. Instead, it gives the lender a lien on the policy as long as there is a balance left on the loan you’re securing. Once the loan is repaid in full, life insurance rights transfer back to you.
As with putting down any collateral for a loan, there’s some risk associated with using your life insurance policy as security.
Want an unsecured business loan? Compare your options
Here’s what to consider when deciding on a life insurance policy:
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Can I lend against my policy by emerald life funeral insurance and wealth creator
Hi Zelia,
Thanks for getting in touch with finder. I hope all is well with you. :)
The answer to your question is yes. It is possible for you to use your Emerald insurance as your collateral. However, please make sure that there are some risks that you need to consider before you go through this process. Please review the information found on this page and review the criteria, details of the loan product you are interested in. Contact the lender directly to discuss your loan options and eligibility.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
Does the life insurance has to be term or accidental only? Or does it have to be whole life insurance in order for the bank to accept the life insurance as collateral?
Hello Charlie,
Thank you for your comment.
Upon research, you can’t borrow against term life insurance, only life insurance with cash value such as whole life can be used as a collateral. This is because the whole life insurance policy builds cash value that you can borrow against at any time, for any reason, without a credit check or even an application process.
Should you wish to have real-time answers to your questions, try our chat box on the lower right corner of our page.
Regards,
Jhezelyn
I would like to get a loan using my life insurance as collateral. I need to find someone to accept me.
Hi Elizabeth,
Thanks for reaching out to us at finder!
Depending on the loan amount you’re looking for and the purpose of the loan, there are lenders that might offer you loan secured by your life insurance. That guide also listed other collateral generally accepted by lenders for different types of loans. If you want to find more about the loan offer and its eligibility criteria, simply click on the lender’s name.
Warm regards,
Liezl
Hi Elizabeth,
Thanks for leaving a comment on finder.
As of now, there are only OnDeck Small Business Loans who can approve you for a loan using your life insurance. You can click the “Go to site” button to start your application and discuss your options with them.
Cheers,
Joel