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Understanding PPF Loans: A Comparison with Personal Loans, Interest Rates, and Rules

In order to meet your immediate financial needs, a PPF loan may also serve as an alternative.

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Understanding PPF Loans

Understanding PPF Loans: In the event that you find yourself in a dire financial situation and wish to deviate from your investment strategy in order to meet your immediate financial needs, a PPF loan may also serve as an alternative. The PFF loan carries a significantly lower interest rate than a personal loan.

Investing in the Public Provident Fund (PPF) yields numerous additional advantages, including the ability to obtain loans secured by the PPF, in addition to interest payments.

However, prior to extending your loan application, you must be aware of certain regulations governing the PPF loan. We will inform you of those regulations in this article.

Interest rate lower than a personal loan

One advantageous aspect of PPF loans is that they do not require collateral in the form of a mortgage, as they are secured by the amount deposited into one’s PPF account.

The interest on the PPF loan is one per cent higher than the interest on the PPF account, per regulation.

This implies that for a PPF loan, an interest rate of 8.1 per cent must be repaid, compared to an interest rate return of 7.1 per cent on a PPF account.

In contrast to the PPF loan, personal loans carry an interest rate cap ranging from 17.50% to 17% or 18%.

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Understanding PPF Loans: Durability of loan

This is yet another crucial aspect of the PPF loan that must be considered. You have been granted three years, or thirty-six instalments, to repay the loan.

  • Nevertheless, the loan may be repaid through a reduced number of instalments.
  • You must initially remit the principal balance of the loan.
  • Subsequently, interest is computed in accordance with the payment period.
  • Moreover, in the event that you receive a large sum payment from an intermediary source, you have the option to repay it in a single instalment.

However, in the event that you fail to repay the loan within a period of 36 months, you will incur a penalty payment equal to 6 per cent of the interest accrued on your PPF balance.

Loan Conditions

  • In order to qualify for a PPF loan, your PPF account must have been active for a full fiscal year.
  • The loan option is no longer accessible on the PPF account following the completion of five years, as it becomes permissible to partially withdraw the PPF amount thereafter.
  • A maximum loan amount of 25% of the funds accessible in the PPF account is permissible.
  • One loan may be secured by a PPF account at a time.
  • Despite having repaid the previous debt, the ability to obtain another loan on this account is still not granted.

Understanding PPF Loans: Applying for a loan

  • A bank loan application can be submitted at the bank where your PPF account is held.
  • To apply for a PPF account held at the State Bank of India, please complete Form D.
  • You are required to include the loan quantity and repayment schedule on the form.
  • It is required that you disclose any prior loan status on the application.
  • The PPF passbook must subsequently be submitted.

Following the completion of all necessary procedures, the bank requires an approximate duration of one week to release the loan.

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