Personal Loan against PPF

PPF (Public Provident Fund) is a long-term scheme with numerous benefits that make it a secure and lucrative investment option. Besides using it to generate wealth, you can avail a personal loan against PPF and get funds affordably. 

However, there are certain details that you need to know before applying for a personal loan on a PPF investment. Read on to know these details and make informed borrowing decisions.

The interest rate on a personal loan against PPF depends on the current interest rate for the scheme. At present, the interest rate is the current return rate + 1%. This means that the interest rate is 8.1%. 

This is because the current return rate for the quarter, since April 2023, is 7.1%.

Keep in mind that you need to repay the borrowed amount within 3 years. If you fail to do so, the rate will rise by 6% instead of 1%.

Here are some of the top features and benefits that you can enjoy with a personal loan on a PPF account:

• Quick access to funds without risking asset

• Availability of the second loan if the first loan is repaid before the 6th financial year

• Competitive interest rates to make financing affordable

• A good credit score is not mandatory due to the nature of the loan

• Repayment flexibility to offer comfort and convenience

Remember that while you do need a good CIBIL score, maintaining your score is crucial to keep your creditworthiness intact. This is because a personal loan against PPF is not available from the seventh year. Post that, you can only make withdrawals.

Moreover, the withdrawals are available only under certain conditions and would ultimately hinder wealth generation efforts. During this time, you can get a regular personal loan, which requires you to have a good credit score for affordability and flexibility.

The scheme was launched to encourage savings, and therefore, withdrawals and loans are subject to certain terms and conditions. While you can get a personal loan on a PPF account between the third and sixth financial year, premature closure is only available after the fifth year.

However, even then, it is subject to the following conditions:

• In case of a change in residential status (Resident citizen to NRI, etc.)

• For life-threatening disease (account holder, spouse, or dependent)

• For higher education of the account holder or dependent children

Keep in mind that premature closure will attract a penalty of 1% interest from the date of opening or the date of extension, whichever is applicable. You can carry out the account closure process by submitting the required form with your passbook at the Post Office where you have the account.

Now that you know the details of a personal loan against PPF, assess your requirements before applying for it. Ensure that you meet all the conditions to enjoy easy access to funds. Moreover, like a personal loan on a PPF account, you can also apply for a loan against property, FD, or other avenues. Compare the affordability and loan amount available under these options to ensure that you make the right choice.