What Is PPF Account Loans? How To Avail It?

PPF is a popular small investment option available in the market which is government backed.We can not find a bank or a financial institution that offers loan at a rate of 2% yearly interest. When you take out a loan against your PPF account, you can avail this benefits. The incredible low rate of interest is the main attraction of taking a loan against PPF account.

There are many advantages associated with PPF accounts like no collateral or mortgage required, repayment tenure of 36 months, lower interest rates, etc. Know more about loan against PPF accounts:

PPF loan

A PPF subscriber can avail loan from his or her PPF account from the third financial year onward. If you opened your PPF account in the financial year 2011-12. You can avail the loan from PPF from the financial year 2014-15. It is important to note that no loan can be taken from the seventh year of opening the PPF account because it qualifies for partial withdrawal.

Form

You cannot walk up to the bank or post office to take a loan against your PPF account. The PPF subscriber needs to follow the proper documentation process and apply for a loan. You have to use Form D to avail loan. Along with Form D, you need to submit the passbook. In the PPF form, the subscriber needs to declare how much loan he or she wishes to take against PPF account. The account Number has to be marked.

Loan period

You can avail loan up to the 6th financial year of account opening. Let us say you opened the account in November 2011. Then you can avail loan from FY 2014-15 to FY 2016-17, i.e., up to 31st March 2017. Because from FY 2017-18 onward, your account will be eligible for withdrawal only. Investing In PPF: Here Are The Advantages

Loan amount

The amount of loan is restricted to 25 per cent of the balance at the end of the second year preceding the year in which the loan is applied for. That is, if you are taking the loan in April 2014, the amount eligible for your PPF loan will be 25% balance available in your account as of 31st March 2014. You will get 25% loan available in an immediately preceding year in which you are applying.

Repayment

The principal loan is repayable either in the lump sum or in installments within 36 months. Interest on PPF account loans should be repaid by two months after the principal amount has been paid off. Interest is charged at 2 per cent more than a subscriber receives on the PPF. If your loan exceeds the 36 month repayment period, it will be charged interest at 6% more than the earning interest rate.

Loan tenure

The loan repayment tenure will be maximum 36 months or 3 years from the first day of the month following the month in which the loan is sanctioned.

Inactive PPF Account

You can not avail loan from an inactive account. You have to activate your PPF account first and then only based on the above conditions; the loan will be sanctioned. How To Open PPF Account In SBI? Few Things To Know