The Public Provident Fund (PPF) is a secure, tax-free investment lasting 15 years, offering fixed income. Opening with just Rs. 500, you can save up to Rs. 1,50,000 annually. It nurtures saving habits, aids long-term planning, and permits short-term loans against investments.
PPF LOAN
PPF functions as a prolonged investment, yet financial requirements can arise. Partial withdrawals are feasible after six years of investment. If you require funds before this duration, you can pursue a loan against your PPF.
If funds are required before six years of investment, a loan against the PPF is an option. Between the third and fifth year of opening the account, you can obtain a loan up to 25% of the balance in the PPF account.
FEATURES OF LOAN AGAINST PPF ACCOUNT
- All regular PPF account holders are eligible for the loan.
- Loan can be availed after one year from the end of the initial subscription year, but before five years from the end of that year.
- The loan amount cannot exceed 25% of the credit at the end of the second year prior to the application.
- A new loan is possible only after the full repayment of the previous loan.
- Only one loan is sanctioned per year, even if repaid in the same year.
- Interest at 1% per annum is paid in two monthly installments after full repayment of the principal amount.
- If not fully repaid within 36 months, outstanding loan accrues 6% per annum interest.
BENEFITS OF LOAN AGAINST PPF ACCOUNT
- PPF loan, being a personal loan, doesn’t need collateral.
- Repayment flexibility: installments or lump sum.
- Loan tenure: 36 months, allowing ample time for repayment.
- Competitive interest rate of 1% p.a. adds to PPF loan’s appeal.
Therefore, in times of urgent financial need, you can secure a loan against your PPF account with favorable interest rates.
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