Policy loan rates aren't standardized. Each carrier sets its own rate based on policy type, issue date, and whether the policy is Direct Recognition or Non-Direct Recognition. This article walks through what the major US carriers charge in 2026 and how to read your own policy's loan provisions.
Two rate structures
Fixed rate. The carrier specifies a fixed APR in the policy contract — 5% or 6%, for instance. The rate can't change for the life of the policy. Common on older whole life policies (issued before about 2015).
Variable rate. The rate floats with an external index, usually Moody's Corporate Bond Yield Average. The contract specifies a maximum (often 8%) and sometimes a floor (4%). Common on newer whole life, UL, IUL, and VUL.
Direct Recognition vs Non-Direct Recognition
Some carriers distinguish between DR and NDR, and it's the single biggest reason a "5% loan" can actually cost 7%. The short version: under Direct Recognition, the carrier reduces the dividend on the cash value backing your loan, so your real cost is the stated rate plus that dividend gap. Under Non-Direct Recognition, the cash value keeps earning its normal rate whether or not it backs a loan. DR is more common on whole life, NDR on UL/IUL/VUL.
This is the mechanic that decides your true cost, so it gets its own piece. The full plain-English version — why the dividend changes, worked examples, and a carrier-neutral table — is in Why Direct Recognition changes what a policy loan really costs. The carrier table below shows where each major carrier lands.
Carrier table
These are based on publicly verifiable disclosures. We exclude carriers where we couldn't find a primary source.
Northwestern Mutual (whole life)
- Stated loan rate: 5% (newer policies) or 8% (older fixed-rate series)
- Direct Recognition: yes
- 2026 dividend interest rate: ~5.75%
- Effective cost: roughly 7.0-8.0% once the dividend gap is included
- Source: Northwestern Mutual dividend disclosures + Inclined's NM case study
MassMutual (whole life)
Two flavors, elected at policy issue:
- Fixed rate (~8%) — Direct Recognition. Effective cost ~8%.
- Adjustable rate (~5.14-5.81%) — Non-Direct Recognition. Effective cost equals stated.
Source: MassMutual's published "How the Dividend Interest Rate is Applied".
Penn Mutual (whole life)
- Stated loan rate: 6.20% fixed
- 2026 DIR: 6.00%
- Direct Recognition applies, but Penn Mutual's "Preferred Loan" provision flattens net cost to near zero from policy year 11 onward
- Effective cost: ~6.2% years 1-10; close to neutral year 11+
- Source: Penn Mutual product disclosures
Guardian (whole life)
- Stated loan rate: ~8% fixed typical
- Direct Recognition (Guardian invented the practice in 1982)
- Loan spread ~1.00% years 1-20, 0.50% year 21+
- Effective cost: ~8%
- Source: Guardian dividend disclosures + Inclined's Guardian case study
New York Life (whole life)
- Stated loan rate: variable, tied to Moody's Corporate Bond Yield Average (~5.33% as of April 2024)
- Non-Direct Recognition
- Effective cost equals stated rate
- Source: NYL Custom Whole Life fact sheet + SEC filings
Pacific Life / Lincoln Financial / Prudential — UL/IUL only, no participating whole life. Loan rates 5-8% depending on product and loan type. Treated in a separate UL/IUL article.
MetLife — excluded. Exited retail individual life in 2017 (spun off to Brighthouse). Only services legacy whole life.
See your carrier's specific rate
Submit your carrier and policy type. We surface stated rate, effective with DR, and Cove's rate side by side.
How to find your own rate
Three places to check.
Your policy contract. Look for "Loan provisions" or "Policy loans". The maximum rate and rate structure are there.
Your latest annual statement. Carriers list the current loan rate (or the rate as of the statement date) for variable-rate policies.
Your carrier's online portal. Most major carriers display current loan rate and available loan amount on the policy details page.
If you can't find it, call the carrier's policyholder service line. You can do this without involving your agent — agents sometimes discourage policy loans because they reduce future commissions.
What to watch out for
Direct recognition with a heavy dividend hit. Some older DR policies cut the dividend on loaned cash value to near zero, dramatically raising the effective cost. Read the disclosure carefully.
Variable-rate ceilings. If your policy has an 8% ceiling and rates are rising, the carrier may move your rate to 8% within a few quarters. Plan repayment based on the ceiling, not the current rate.
Policy-loan-to-cash-value ratio. As the loan balance approaches the cash value, lapse risk goes up. Most carriers notify you when the ratio crosses 90% — but the notification is often a paper letter that's easy to miss.
Premium continuation. Taking a loan doesn't pause your premium. If you have to skip a premium with a loan outstanding, the policy can drain faster than expected.
How Cove fits
Cove lends against your policy directly, rather than routing the loan through your carrier. The carrier doesn't reduce your dividend because they don't see a loan on the policy. The dividend gap that would have gone to the carrier stays in your cash value.
On Direct Recognition carriers (NM, MM fixed, Guardian), this saves 1-1.5% per year on the effective cost — every year the loan is outstanding.
On NDR carriers (NYL, MM adjustable, Penn Mutual year 11+), the savings are minimal. We're upfront about that. The value in those cases is process speed and avoiding agent involvement, not rate savings.
Carrier rate information is illustrative and based on publicly available 2026 disclosures. Confirm with your carrier or in your policy contract before taking action. Cove is a consumer credit platform and is not affiliated with the carriers named.
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