PPF vs Personal Loans: PPF loans are another option if you find yourself in a bind and find yourself forced to forgo your investing strategy in order to meet your financial obligations. A personal loan has a substantially higher interest rate than the PFF loan. The loan against the PPF is one of the many advantages of investing in the Public Provident Fund (PPF), in addition to earning interest on your investment.
Understanding PPF Loan Regulations and Advantages
Prior to extending your loan application, you should be aware of a few PPF loan regulations. We will explain these guidelines to you in this article. The benefit of a PPF loan is that since it is granted based on the amount deposited in your PPF account, you do not need to mortgage anything in order to obtain one. The interest on the PPF loan is one percent more than the interest on the PPF account in accordance with the guidelines. To put it another way, if your PPF account earns an interest rate return of 7.1%, your PPF loan will have an interest rate of 8.1%. The interest rate on a personal loan might range from 10.50% to 17 or 18%, which is higher than the PPF loan.
Three Years to Settle the Debt, but Beware the Penalty
This is also another crucial detail regarding the PPF loan. You have three years, or 36 installments, to repay the loan after accepting it. You can, however, pay back the loan in less installments. The principle balance of the loan must first be paid. The interest is later computed using the payment period. In addition, if you receive a lump sum payment anywhere along the line, you can repay it by making the payment all at once. However, as a penalty, you will be required to repay the loan at a rate that is 6% higher than the interest on your PPF amount if you are unable to pay it back in full within 36 months.
Who Can Apply for a PPF Loan and When
Only PPF accounts that have been open for one fiscal year may submit an application for a loan. Because you can partially withdraw the PPF money after five years, the loan facility is not accessible on PPF accounts after that point. Only 25% of the money in your PPF account may be accessed as a loan. Only one loan may be taken out against your PPF account. Even if you have paid back the previous loan, you are still not eligible for a re-loan on this account.
Applying for a PPF Loan
The bank where you have a PPF account is where you can apply for a bank loan. Fill out Form D for your PPF account if it is with State Bank of India. You must enter the loan amount and repayment duration in the form. You must indicate on the form if you have ever accepted a loan in the past. The PPF passbook must then be turned in after that. The bank takes roughly a week to disburse the loan when all the requirements are finished.
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