The public provident fund is a government savings and investment scheme that encourages individuals to practise long term investment. The lock in period of the scheme is 15 years, which can be inconvenient if the investor requires urgent financial needs. For this, individuals can avail a loan against PPF. This option is available only after the completion of the 3rd financial year up to the end of the 6th financial year of account opening.
A PPF loan can be taken for a maximum amount of 25% of the total balance available at the end of the 2nd year preceding the year in which the loan is applied. Moreover, you are eligible to apply for a second loan once you fully repay the first loan.
Taking a loan against PPF can be for several reasons. Firstly, it provides a solution for immediate liquidity without the need for closing the account prematurely. Taking a PPF loan also comes with the allure of lower interest rates compared to other alternatives. Which makes it a cost-effective choice.
This loan allows people to access funds while maintaining the potential for future growth. The structured repayment terms offer a clear and manageable repayment schedule. This approach also helps individuals avoid unplanned withdrawals, ensuring that their long term investment goals remain intact.
The PPF loan interest rate is usually lower compared to other loan types, making it an attractive option for individuals seeking liquidity while preserving the benefits of their PPF investment. The interest rate for loans against PPF is currently 1% higher than the set interest rate of your PPF account.
The current interest rate for a PPF account is 7.1%, therefore, the loan interest rate will be fixed at 8.1%.
Several top banks offer loans against PPF accounts, which provides a financial avenue for individuals who are in need of urgent funds. Below is a table of all the top banks offering PPF loan:
|State Bank of India
|Union Bank of India
|Bank of Baroda
|Bank of India
|Punjab National Bank
|Indian Overseas Bank
All individuals who are holding an active PPF account are eligible for a loan against PPF. Moreover, the account must fall under the specified time period of between the 3rd and 6th year.
To avail a loan against PPF, you will need Form D which you can get from the nearest post office or bank branch. All you need to do is submit the form along with a copy of your passbook.
Do you need an instant loan?
Taking a PPF loan is a strategic financial opportunity as it offers many features and benefits to the PPF account holder, these are:
The loan amount for loan against PPF is capped at 25% of the total balance available at the end of the 2nd year immediately preceding the year the loan is applied for. For example, if you want to take a loan for the year 2024-2025, then you will get a loan amount equal to 25% of the available balance as on 31st March 2023.
If the balance available as on 31st March 2023 is ₹2,00,000, then the loan amount you will be eligible for is ₹50,000.
If you wish to apply for a loan against PPF, you can follow the steps below:
1. Visit the nearest post office branch or bank branch where the account is held.
2. Ask for Form D and fill in all the necessary details along with the account number, loan amount required and more.
3. Also fill in a declaration form that you will repay the amount within 36 months.
4. You can then submit the form along with a copy of the passbook.
5. Your loan application will then be reviewed and processed accordingly.
Looking for a personal loan?
You can also check other secured loan options from below:
|Loan Against Mutual Funds
|Loan Against Securities
|Loan Against FD
|Loan Against Car
|Loan Against LIC Policy
|Loan on Credit Card
|Loan Against Gold
|Loan Against Bonds
|Loan Against Shares
|Loan Against EPF
|Loan against SGB
|Loan Against Agricultural Land
|Loan Against Property
|Loan Against Insurance Policy
A loan against PPF is a loan taken by individuals by using funds from the accumulated balance in their PPF account as collateral.
Can I avail a loan against my PPF account?
A loan against PPF allows individuals to borrow funds using their PPF account balance as collateral. This provides liquidity while retaining the potential of future growth.
All PPF account holders are eligible for a loan against PPF account.
You can borrow a maximum of 25% of the total balance available at the end of the second year immediately preceding the year the loan is applied.
The interest rate for PPF loans is 1% higher than the PPF account interest rate. Which is 8.1%.
The maximum tenure of a PPF loan is 36 months.
You can apply for a loan against your PPF account through the bank or post office where your active PPF account is held.
All you need to provide is a copy of your PPF account passbook.
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