The Public Provident Fund (PPF) was introduced in 1968 by the Government of India as a long-term savings scheme with attractive interest rates and tax benefits. It is a widely preferred investment option for individuals who want a safe and secure way to save money for the future.
The account has a lock-in period of 15 years, which can be extended in blocks of 5 years.
It can be opened with as little as Rs.100.
The maximum deposit allowed in a financial year is Rs.1.5 lakh.
Deposits can be made through cheque, demand draft, or online transfer.
A minimum deposit of Rs.500 per year is required to keep the account active.
Premature closure is allowed after 5 years under specific conditions such as medical emergencies, higher education, or marriage of the account holder or their child.
Partial withdrawals are permitted from the 7th financial year onward, subject to specific conditions.
A loan against a PPF account allows an account holder to borrow money by using their PPF balance as security. However, this loan is available only under certain conditions.
A loan can be availed only between the 3rd and 6th financial year of opening the PPF account.
The maximum loan amount is limited to 25% of the balance available at the end of the second financial year before the year in which the loan is applied.
If the first loan is not repaid, a second loan cannot be availed.
The interest rate on the loan is 1% higher than the prevailing PPF interest rate. If the PPF interest rate changes, it does not affect the interest on an already sanctioned loan.
The repayment period is 36 months (3 years) from the date of sanction.
If the loan is not repaid within 36 months, the applicable interest rate increases to 6% above the PPF interest rate.
If the principal amount is repaid but the interest is not fully paid, the remaining amount will be deducted from the PPF balance.
The borrower must first repay the principal and then the interest, which can be paid in a lump sum or in two or more monthly installments.
No Collateral Required: Unlike other loans, borrowing against a PPF account does not require pledging any assets or security.
Lower Interest Rate: The loan interest rate is significantly lower than regular personal loans offered by banks and NBFCs.
Flexible Repayment Period: The borrower has a period of 36 months to repay the loan, making it easier to manage the repayment schedule.
Early Access to Funds: Individuals who need emergency funds but do not want to break their PPF investment can opt for this loan.
No Impact on Credit Score: Since it is a secured loan against PPF balance, it does not affect the borrower's credit score even if the loan is not repaid on time.
Lump Sum or Installment Repayment: The borrower has the flexibility to repay the principal amount in one go or in multiple installments.
Restricted Loan Period: The loan facility is available only between the 3rd and 6th year of opening the account. After that, the account holder cannot avail of a loan.
Limited Loan Amount: Since the maximum loan amount is only 25% of the balance at the end of the second preceding year, it may not be sufficient for large financial needs.
No Second Loan Without First Loan Repayment: If a borrower needs another loan against their PPF, they must fully repay the first loan before applying again.
Higher Interest on Delayed Repayment: If the loan is not repaid within the stipulated time, the interest rate increases significantly.
Personal Loan from Banks/NBFCs: If the PPF loan amount is insufficient, applying for a personal loan from a bank or financial institution can be a better option.
Gold Loan: If you have gold, you can pledge it and get a loan at a lower interest rate than unsecured personal loans.
Loan Against Fixed Deposit: If you have a fixed deposit, you can take a loan against it at an interest rate lower than personal loans.
Loan Against Mutual Funds or Shares: Some banks and NBFCs offer loans against mutual funds or shares as collateral.
Borrowing from Friends or Family: This can be a cost-effective option if you need funds for a short-term requirement.
A loan against a PPF account can be a good choice if you need short-term money without using your savings. However, since the loan amount is limited and the option is available for only a few years, it might not always be the best solution. You should think about things like your ability to repay and other options before making a decision.
We understand that getting a loan can be very stressful with confusing documents, unclear communication, and various other challenges. That is why we take care of your loan application process, saving you time and hassle by handling the paperwork and communicating with the loan providers.
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No, you can only avail 25% of the balance available at the end of the second financial year before the loan application.
No, the loan facility is available only between the 3rd and 6th financial year of opening the account.
The interest rate will increase by 6% above the prevailing PPF interest rate, making it more expensive to repay.
It depends on your financial requirement. A loan against PPF has a lower interest rate but a lower loan amount, while personal loans offer higher amounts but at a higher interest rate.
No, taking a loan against your PPF does not impact the tax benefits of your PPF investment.
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