PPF Loan- How to Apply for Loan Against PPF Account

The Public Provident Fund (PPF) is a popular investment option because it is backed by the Government of India and offers an attractive interest rate and guaranteed returns. The Public Provident Fund (PPF) scheme is a fixed-income investment scheme open to the general public. The scheme allows you to save regularly over a long period of time and build a guaranteed corpus. Furthermore, if you need money quickly, you can get a loan against your PPF account at a low interest rate. However, before we get into the loan against PPF, let's take a look at the PPF scheme

Features of the PPF Scheme

• This is a long-term savings plan that lasts 15 years. After maturity, you can extend the tenure in 5-year increments.
• The interest rate on the PPF account is set by the government and is reviewed on a regular basis. The current interest rate is 7.4%, effective October 1, 2020. Interest is compounded annually and added to the amount deposited.
• Investments in the PPF scheme are eligible for Section 80C deductions up to Rs.1.5 lakh. Furthermore, the earned returns and maturity proceeds are completely tax-free.
• PPF accounts can be opened at authorised banks and post offices.
• The minimum deposit is Rs.100, and there is no maximum limit.
• One PPF account in the name of a single person is permitted.
• To keep the PPF account active, a single deposit is required each fiscal year.

Loan Against PPF

PPF is a long-term investment scheme, and you may require funds for financial reasons at times. If you require funds, you can make partial withdrawals from your PPF. However, such withdrawals are permitted after six years of investment in the account. If you require funds before this time, you can take out a loan against your PPF. If you require funds before completing the six-year investment period, you can borrow against your PPF. A loan against a PPF account is available between the third and fifth years after the account is opened. This loan is available for up to 25% of the balance in the PPF account two years prior to the loan application.

Interest on loan against PPF

The interest rate on the loan from the PPF account is 1% higher than the current government-set interest rate. If you go to your nearest PPF branch right now and ask for a loan, the interest rate will be 8.1%. (PPF interest rate is 7.1 percent). The interest rate on the loan will remain constant until the loan is repaid.

Other Aspects related to the loan against PPF

• The maximum repayment period for the loan is 36 months
• After the loan's principal is paid, the interest should be paid in one or two instalments.
• If the loan is not repaid within 36 months, the interest rate on the loan against PPF will rise to 6% from 1%.
• The PPF Account balance does not earn any interest until the loan is repaid.