In India, the Public Provident Fund (PPF) is a well-liked savings plan that offers tax advantages, competitive interest rates, and safety. However, there could be times when you can find yourself in need of instant funds and not wanting to sell your investments. In these situations, one might ask if borrowing money from a top loan company is feasible against PPF. The good news is that your PPF account can be used as collateral for a loan. You can find all the information you require to apply for a loan against your PPF in this post.
Understanding PPF
Before getting into the specifics of borrowing against PPF, let’s take a moment to clarify what PPF is and why it is a recommended investment choice.
What is PPF?
The acronym for the Public Provident Fund is PPF. Launched in 1968 by the Ministry of Finance’s National Savings Institute, it is a government-backed savings programme. PPF’s primary goal is to encourage modest savings by providing an investment option that offers both income tax advantages and respectable returns.
Important PPF Features
Interest Rate: The government sets and modifies the quarterly PPF interest rate. When compared to fixed deposits and standard savings accounts, it usually gives higher interest.
Tenure: PPF has a 15-year lock-in duration that may be extended in 5-year increments.
Benefits for Taxes: Under Section 80C of the Income Tax Act, contributions to PPF are deductible from taxes. In addition, both the maturity amount and the interest are tax-free.
Investment Limits: A yearly investment of ₹500 is the least, while ₹1.5 lakh is the maximum.
Risk-free: PPF is considered one of the safest investing alternatives because it is a government-backed programme.
Loan Against PPF: Fundamentals PPF Account in Top Loan CompaniesQualifications
To qualify for a loan against your PPF account, you need to fulfil the accompanying requirements:
Age of Account:
Account Age: The PPF account needs to be three years old or older.
Loan Period: Only the third and sixth fiscal years after the account’s creation are eligible for a loan.
Amount of Loan
Up to 25% of the balance in your PPF account at the end of the second year, which comes right before the year the loan is sought, is the maximum loan amount you may take out against your PPF account.
Rate of Interest
When a loan is applied for against PPF, the interest rate is typically 1% greater than the interest rate of PPF. For example, the loan interest rate will be 8.1% if the PPF interest rate is 7.1%.
Duration of Repayment
Repayment of the PPF loan is required in three years or 36 months. The loan may be repaid in full or in equal monthly payments.
How to File a Loan Application Against PPF
The following stages are included in the simple loan application process against PPF in top loan companies.
Visit the Post Office or Bank: Proceed to the Post Office or Bank where your PPF account is maintained.
Complete the Application for a Loan: Make a request and complete the loan application. Form D is the name of this form.
Send in Required Documents: Send a copy of your PPF passbook and the completed form.
Processing: The loan money will be disbursed, and the bank or post office will process your application.
Conclusion
Meeting urgent financial demands without selling your investments is easy and affordable when you take a loan against your PPF account from top loan companies. It offers an excellent substitute for high-interest loans because of its quick payout and cheap interest rate. It is essential to acknowledge its constraints, including the brief payback period.
