Loan Against PPF Account In India

Many people shy away from availing loans and prefer running to their savings, even if it means cracking their nest egg meant for retirement. If you know your needs and repayment capacities, availing a loan can be a great way to meet your immediate unplanned financial needs. A suitable loan can be a powerful tool to manage finances, provided you use it responsibly.

The most common form of a loan is a personal loan, which comes in handy in case of a financial crisis. Factors like the flexibility of usage and quick loan processing make this the loan of choice. There's also another way.

You can avail a loan against PPF, without having to break your fixed deposits. So, what should you do if you need money in a hurry? Let's find out.

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Loan Against PPF Account In India

PPF is an excellent investment for retirement. Its one of the best fixed-income instruments around. PPF offers 7.6% interest for the April to June Quarter. PPF has a lock-in of 15 years. PPF also enjoys the EEE benefit and is an excellent tax saving investment.

So should you avail a loan against PPF? The repayment tenure of a personal loan is decided after both parties agree upon a specific term at the time of availing the loan. A loan against PPF must be repaid within 3 years, and if you fail to do so, the interest rate increases by 6% from the current rate.

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• Loan Amount: For a loan against PPF, the maximum amount which can be availed is 25% of the PPF account balance at the end of the second year, prior to the year of loan application.
• Loan against PPF can be availed just once a year: A loan against PPF can help you deal with a liquidity crunch, but only once a year. You are not allowed to avail the second loan in the Financial Year, even if your previous loan has been repaid. This is where Personal loan wins over the loan against PPF. You can avail more than one personal loan in a year, as long as you are paying EMIs on time and the lender is ready to sanction the personal loan.
• Interest Rates on loan against PPF: In case of Loan against PPF, there is no scope for negotiation and the rate of interest will always be 2% more than the current rate offered on the PPF balance, which is far lower than Personal Loan interest rates, provided you make the repayment within 3 years. After this time period, the interest rate jumps to 6% more than the current rate offered on the PPF balance. Another benefit of a loan against PPF is you continue to earn interest on your PPF account, even if you have availed a loan against it.

If you need money in a hurry, a loan against PPF may be the answer. Put your PPF account to good use.

Be Wise, Get Rich.