The correct answer is: C. Both A & B
A policy loan is a loan that is secured by a life insurance policy. The loan amount is typically a percentage of the policy’s cash value, and the interest rate is usually lower than the interest rate on a personal loan. Policy loans are not subject to credit checks, and there is no legal obligation to repay the loan. However, if the loan is not repaid, the policy’s cash value will be reduced.
A commercial loan is a loan that is made to a business. Commercial loans are typically used to finance business expenses, such as equipment purchases, inventory, or working capital. Commercial loans are subject to credit checks, and the interest rate is usually higher than the interest rate on a personal loan.
The main differences between a policy loan and a commercial loan are:
- A policy loan is secured by a life insurance policy, while a commercial loan is not.
- Policy loans are not subject to credit checks, while commercial loans are.
- There is no legal obligation to repay a policy loan, while there is an obligation to repay a commercial loan.
- The interest rate on a policy loan is usually lower than the interest rate on a commercial loan.
Policy loans can be a good option for people who need to borrow money but do not have good credit. However, it is important to understand that policy loans will reduce the cash value of the policy. If the policy is not surrendered, the loan will need to be repaid with interest.