Public provident Fund at present offers an interest rate of 8.1 per cent, which will be decided on quarterly basis. One can also avail loan on your PPF account on completion of certain years.
Interest rate offered on loan is more attractive than any other form of loan, including personal loans due to applicable interest rates.
Here are 8 must know things if you are planning to avail.
When can it be availed
One can avail a loan from your PPF account from the 3rd year of opening an account to the 6th year.
The loan amount is restricted to a maximum of 25 per cent of the balance in your account at the end of the first financial year where in if you opt for 3rd year. Which means in the fourth year, the second year's balance will be taken into account.
However, one is not eligible to avail loan from seventh year of opening the PPF account as one can withdraw the amount during 7th year.
Note that one has to repay the loan amount within 36 months. The repayment of principal can be made in lump sum or monthly installments.
Interest rate on loan
Interest rate on loan is applicable at 2% per annum more on the prevailing PPF interest rate. If the loan is not repaid on time, 6 per cent more will be charged more on the amount what their deposits tend to charge.
Payment of principal and interest
The principal can be paid either in lump sum or in installments within 36 months. While, the interest part has to be repaid in two monthly installments once the principal is paid.
Individuals can avail second loan on PPF only after completely paying the first loan.
Individuals with inactive account are not eligible to avail loan on PPF amount. To take loan one has to activate the account by depositing the required amount along with penalty.