Loans in PPF

 

Loans in PPF

Public Provident Funds are an amazing choice for long term small saving investment.  One of the best features of PPF is that you can avail loan against your investment. All these features coupled with complete tax saving option makes if a viable option for middle class people. Following are the things that you should know when it comes to loans against PPF account.

Loans in PPF

  1. If you have a PPF account, you can get loan against your account from the third to sixth year or investment. For example, if your account was opened in fiscal year 2011-12, you can get loan within the financial years of 2014-15 and 2017-18
  2. You can avail a loan of up to twenty five per cent of the available balance at the time of taking loan against your PPF account.
  3. Loans can only be availed till the sixth year of account tenure. You would not be eligible for a loan from seventh year or subscription.  Not the least, you can use partial withdrawal service against your PPF account.
  4. If you have taken loan against your PPF account, you would have to either pay the amount in 36 installments or pay the amount in lump sum. The choice is always yours.
  5. There is an interest charged on the amount of loan you take out of your PPF account. The interest is charged at the rate of two per cent of the amount taken as loan.  The interest would not be paid along with the PPF account.  First you would pay the principal amount and once the entire principal amount is paid, it would be followed by two consecutive months of interest payment.
  6. While the principal amount is being paid off, the balance amount available in your PPF account would call for additional at the current rate of interest in PPF.
  7. There is a clause for non-payment or delayed payment of installments in PPF loans. If you have not paid your loan installments on time, an interest rate of 6 per cent higher than what you are getting on your PPF amount would be charged on the amount pending of the loan.
  8. If you have not been able to pay off your loan amount before 36 months of taking the loan, the balance loan amount would be deducted from your PPF accumulated amount at the end of every fiscal year.
  9. If you have been able to pay-off your loan amount before 36 months in accumulated amount or in lump sum, you would be eligible for a second loan thereafter.

We hope this information would give you a better understanding of the loan facility in Public Provident Funds.  In actual, you yourself have to make assessment of various aspects of loan facility in PPF in consultation with your banker.

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