The Public Provident Fund (PPF) is a government scheme. Any citizen of the country can invest in this scheme. In this, the benefit of compounding interest is available, and along with this, tax benefits (Tax Benefits on PPF) are also available.
At present, interest on PPF is 7.1 percent (PPF Interest Rates). An annual investment of Rs 500 to a maximum of Rs 1,50,000 can be made in this scheme.
PPF scheme matures in 15 years, but through this people can add a good amount of funds in 15 years. Not only this, if you suddenly need money, you also get the facility of a loan on PPF. This interest is also much lower as compared to a personal loan. However, there are some conditions related to loan facility on PPF. Let us tell you about it.
The loan has to be repaid in 36 installments-
There are two ways to repay the loan taken against PPF. First, you can either pay it in a lump sum and the second way is to pay in installments. If you choose the second method, then you have to repay the loan amount in a maximum of 36 installments i.e. in 3 years. If you are not able to repay the loan within 36 months, then as a penalty you will have to repay the loan at an interest rate of 6 percent more than the interest rate available on PPF. First of all, you have to pay the principal amount of the loan. Later the interest is calculated according to the payment period.
At what interest is the loan available?
One advantage of taking a loan from a PPF account is that the interest in it is much lower than a personal loan. As per the rules, the interest rate on a PPF loan is only 1% more than the interest rate on a PPF account. That means if you are taking 7.1% interest on the PPF account, then you will have to pay 8.1% interest on taking the loan.
Loan terms-
PPF account should be at least one financial year old, only then you can apply for the loan.
After the completion of five years of the PPF account, a loan facility is not available because after this you can withdraw the amount partially.
You can take only 25% of the amount available in the PPF account as a loan.
You can take a loan against a PPF account only once. Even if you have repaid the earlier loan, you still do not get the facility of re-loan on this account.
What is the benefit-
Apart from getting the benefit of a loan facility with a low-interest rate, there is another advantage of a loan on PPF, that is, usually whenever you apply for a loan, you have to pledge gold or property, but on PPF You are neither required to pledge anything for the loan nor is any proof of your income asked. You get this loan on the basis of the amount deposited in your PPF account.
How to apply for a loan-
You will have to go to the branch of the bank where the PPF account is opened, fill out the form, and apply for the loan. Form D is used for this in SBI. Along with this, the loan amount and the period for repayment will have to be written in an application. If you have taken any loans before this, then you will have to mention that also. After this, the PPF passbook will have to be submitted. After the entire process, the loan is approved within about a week.
PC Social media
