Public Provident Fund allows its subscribers to get loan against PPF account, find out the advantages, eligibility, and process to apply for a loan against PPF.
PPF or Public Provident Fund is a long-term saving scheme by the Government of India that allows subscribers to save tax on principal and earn interest on savings as well. Moreover, PPF account holders can get loan against PPF accounts or partially withdraw funds when in need. This loan against PPF account feature is very helpful for people who want to apply for loans for a short period of time, without putting up any security. Additionally, compared to other financing choices, the interest loan provided here is considerably lower.
Important Features of Loan Against PPF Account
- The facility of availing loan against a PPF account is applicable to all the PPF account holders.
- The account holder can only avail one loan at a time against the PPF account. The account holder cannot apply for a second loan until the first loan is fully repaid.
- After opening the PPF account, the account holder can apply for a loan starting from the third financial year up till the sixth financial year.
- Starting from the seventh financial year after opening the PPF account, the account holder cannot avail any loan. After that, the money can only be withdrawn partially.
- In a case where the PPF account is under the name of a minor child, his/her parents can appeal for a loan as a representative of the minor child.
- The overdue amount will be removed from the balance of the PPF account of the holder if the principal is returned within the loan’s term but some of the interest still needs to be paid.
- The amount of the loan available is 25% of the balance of the PPF account after the conclusion of the second year or the year before the loan was applied.
- Within 36 months of receiving the loan, the account holders must pay it back. The account holder may do so in two ways. First, through a lump sum; second, through two monthly installments.
Process To Apply For Loan Against PPF Account
PPF subscribers who wish to get loan against PPF account need to fill out Form D, The Form D for loan against PPF account can be obtained from the post office or from the bank where the subscriber has his account. The account holder needs to fill out his/her PPF account number, the amount of loan needed, and details of the loan previously taken against the PPF account in Form D.
Form D PDF Sample for Loan Against PPF
Advantages of Taking Loan Against PPF
Some of the important advantages are listed below:
- Flexible terms or repayment – The amount of the loan taken can be repaid in two ways. First, through a lump sum, and second through monthly installments.
- No security is required – People can take a loan against their PPF account without putting up any security. It is helpful for those who want to apply for loans for a short period of time.
- The rate of interest is considerably lower – Compared to other financing choices, the interest loan provided here is considerably lower. The loan against PPF can be availed as low as 1% for 36 months period after which the rate of interest is revised to 6% per annum. This is yet another important feature of applying for a loan against your PPF account.
