It often happens that in case of emergency, we have to get help from our relatives and friends when we need money. Apart from this, many times one has to take a personal loan at expensive interest rates. But on taking a loan through PPF, you have to pay only 1 percent interest.

The Public Provident Fund (PPF) is a savings scheme. A person investing in this scheme gets 7.1 percent interest annually. Apart from this, the facility of taking a loan on a PPF account is also available. A loan against PPF is much cheaper than a personal loan.

In fact, on taking a loan, you have to pay 1 percent more interest than the interest you get on PPF. This means that currently, the interest on PPF is 7.1 percent, so you will have to pay 8.1 percent interest annually. This way, you will have to pay only 1 percent interest. There has been no change in this scheme of the Public Provident Fund since April 2020.

Loan terms against PPF

  • PPF account should be at least 2 years old.
  • The loan amount can be up to 25% of the amount deposited in the account.
  • The loan tenure is up to 36 months.
  • The interest rate on the loan is 1% per annum.

How to take a loan on PPF

First of all, you have to apply for a PPF loan at your nearest bank.

Along with the application form, you must also submit these documents:

  • Aadhar Card and PAN Card
  • Passport size photo
  • PPF account passbook
  • Bank statement

The bank will scrutinize your application and if you are eligible, you will get the loan.

How to pay a loan on PPF

You will have to pay the loan instalment every month. The loan instalment is calculated as follows:

  • Loan amount
  • Rate of interest
  • Duration 12 months

Benefits of loan against PPF

  • The loan available against PPF is very cheap.
  • The loan tenure is up to 36 months.
  • The loan instalment has to be paid every month.

Keep in mind while paying EMI of the loan on PPF

The customer is given 36 months to repay the loan. It is important to repay your loan within this stipulated time because if you do not repay, your interest will be 6 percent instead of 1 percent. This means that now you may have to pay 13.1 percent annual interest instead of 8.1 percent. Therefore, after taking loan on PPF, try not to miss even a single EMI, otherwise instead of saving, your debt may increase. Also, if you do not pay EMI, banks can deduct money from your PPF account.

A loan against PPF can be a great option if you need money suddenly. This loan is much cheaper than a personal loan. Therefore, if you invest in PPF, you should also know about the loan facility.

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