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How To Get A Loan From EPF Account

IndianMoney.com Research Team | Updated On Friday, February 03,2017, 04:15 PM
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How To Get A Loan From EPF Account

You work for a reputed Company and earn a handsome salary. But, is your entire salary yours? No, if you are a salaried employee, you have to compulsorily invest a part of your salary in the employee provident fund, popularly called EPF.

An amount of 12% of your basic salary, is compulsorily deducted by your employer. This amount is deposited in an account in your name, called the employee provident fund. Your employer makes an equal contribution (contributes the same amount as you have contributed), to this account. This account is maintained by the EPFO and interest is paid on it. You get this money when you retire, to enjoy a happy retirement.

But, what if you need money for something really important in life, Right Now? What if you need money for your marriage? What if you need money to buy a plot of land which could give great returns in a few years? What if you need money to repay your home loan? There’s some good news. You can take a loan from your EPF account and you don’t need to return it.

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How to get a loan from EPF account?

Strictly speaking this is not a loan. It’s an advance which you can avail only in specific situations. You can get this advance even when you are still working (in a job with your current employer). The amount you can get as an advance, depends on the specific situation you need the money and also the number of years, you are in service.

You have to submit Form 31 called the EPF advance form, through your employer to the EPFO, along with relevant documents. If you need the advance for your marriage, you need to submit the marriage invitation card along with the application.

In the EPF Form 31, you will have to give PF account number, salary and bank account details. Your claim is then processed and money is directly credited to your bank account.

When can you avail a loan against EPF?

Marriage:

You can take an advance against EPF for marriage expenses of self/brother/sister/daughter/son. The maximum amount you get is 50% of your (employee) share + interest, at the time of presenting your application.

You have a maximum of only 3 withdrawals in your whole life. Your membership period must be 7 years. You might need to show the marriage invitation card.

Education:

You can take an advance against EPF for education fees of self/brother/sister/daughter/son. The maximum amount you get is 50% of your (employee) share + interest, at the time of presenting your application.

You have a maximum of only 3 withdrawals in your whole life. Your membership period must be 7 years. You might need to show a certificate regarding course of study and estimated course fees.

Medical expenses:

You can take an advance against EPF for treatment of a serious illness. This money can be withdrawn for medical treatment for self, spouse, son, daughter, dependent father or mother. The maximum amount you get is 6 months basic salary + dearness allowance or your (employee) share with interest, whichever is less.

You have a maximum of only 1 withdrawal in your whole life. You can get this advance anytime. You may need a doctor’s certificate.

Repayment of home loan:

You can take advance against EPF to repay your outstanding home loan from a Nationalized bank or a registered co-operative society.

The maximum amount you get is 36 months basic salary + dearness allowance or the total of your (employee) share and employer’s contribution to EPF with interest or total outstanding principal + interest, whichever is least.

You have a maximum of only 1 withdrawal in your whole life. Your membership period must be 10 years. You might need a certificate from the bank/lender showing outstanding principal + interest.

Purchase of a home or plot of land:

You can take advance against EPF to buy a house or a plot of land.

The maximum amount you get is 36 months basic salary + dearness allowance or the total of your (employee) share and employer’s contribution to EPF with interest or the total cost of purchase of the house/plot, whichever is least.

You have a maximum of only 1 withdrawal in your whole life. Your membership period must be 5 years.

You need to take an advance on the money in your EPF, only as a last resort. It’s the money you need for retirement. Be Wise, Get Rich.

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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