Securing a Bank Loan against Life Insurance Policy

loveandlight

I need to borrow about £30,000 to buy a business. The business is £42,500. I have £10,000 to put down. I have a life policy that matures in 5 years time. Although it should pay out to the sum of £30,000 it is performing at a rate that will give me at least £25,000 but unlikely to be £30,000. Does anyone know how much the bank will lend me against this policy and what will be involved and how long roughly it will take for the bank to make their decision and hopefully lend me the money?

I have an appointment on Monday with Lloyds so would like to be a little prepared beforehand.

Thanks for your help.

petermb_2

You need to contact an independent financial adviser.

loveandlight

I tried that route by going to a commercial broker as he said he could get it for me based on the business figures, provided I put up half which I did. He made a right pigs ear of it all and I got treated like I was a bad debtor ( no offence to bad debtors!) but it was a very very stressful experience and after 5-6 weeks and three credit searches against me, there is still no sign of an answer. He also approached my own bank without my permission. Hence why I have lost confidence in him.

I have banked with my own bank for 30 years and have excellent credit and have this policy, hence why I am now going this route and need answers as per my original question.

petermb_2

I think this is your best route. Your bank will usually help if your financials stack up.

Coupon-mad

Have you asked the life assurance company if they can provide a Policy Loan and what the terms & maximum amount would be? You would need to contact their Head Office and ask for the section that deals with Policy Loans.

It sounds like you have had the policy for some time and if it's an endowment policy like mine was then it MAY be possible to do this. I had a policy loan against our endowment policy once, paid it off now and the policy remains unaffected.

But I didn't think the interest rate was that competitive, with hindsight, however it's another option to explore, assuming you are not relying on the policy to cover your mortgage already.

loveandlight

Thanks for your helpful advice Coupon-mad. Unfortunately the life assurance company will only lend against present value and not future value so they would not be able to lend me enough.

jonesMUFCforever

Lloyds will lend to you on the basis of the figures for the business not just what the policy is/will be worth in a few years time.
The policy will become the 'insurance' for the bank in case you default.

So my advice is make sure that you business plan is spot on without any obvious flaws.