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EPF- How to Withdraw PF Amount To Repay Home Loan
Home loan interest rates have recently risen in response to RBI repo rate hikes. Several banks have raised interest rates for both existing and new borrowers. The rising interest rate on home loans sparked debate over what borrowers should do to reduce their interest payments against their outstanding loan balance. One option is to use their Employees Provident Fund (EPF) amount to prepay their home loans, either entirely or partially. Here is how you can withdraw PF amount to repay the home loan.
Is it possible to use your EPF balance to pay off your home Loan?
You can withdraw the EPF amount for repayment of your home loan under Section 68BB of the EPF Scheme. The home, however, must be registered in the name of the PF member, either individually or jointly. The applicant for a home loan must have at least ten years of PF contribution history. After five years of continuous service, the withdrawn PF amount will not be taxed.
How to withdraw EPF Corpus for repayment of home loan?
Before proceeding, you must thoroughly examine all aspects. If you are still in your early career, you can use the PF corpus to repay the home loan because you have a long time to replenish the fund in your EPF account.
Furthermore, if the home loan interest rate is higher than the EPF interest rate, you can use the EPF corpus to repay the home loan, saving money on interest payments. If the EPF interest rate is higher or equal to the home loan interest rate, you may be able to avoid affecting your EPF corpus. Follow these steps to withdraw epf corpus for repayment of home loan-
- Log in to the EPFO e-SEVA portal.
- Login using your UAN, password, and captcha code.
- Go to the "Online Services" section.
- Select claim form 31 from the dropdown menu.
- Enter your banking information and click the Verify button.
- Double-check the terms and conditions.
- Proceed to the online claim and choose the claim settlement.
- Choose the advance's purpose.
- Enter information such as the required amount and address.
- upload the documents and your application will be processed.
When should a PF fund be withdrawn to pay off a home loan?
Withdrawing PF funds should be considered as a last resort. You can use the PF corpus if you are in a temporary financial situation and expect to get out of it soon. However, if you are unsure when your financial situation will be resolved, you should first consider other options such as increasing the loan tenure to lower the EMI or using FDs to manage repayment. The PF amount is intended for retirement planning, and you should keep it safe for that purpose and not use it for a home loan.
