Loan Against PPF

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.

Why Take a Loan Against PPF?

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.

Interest Rates for Loan Against PPF

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%.

Interest rate 8.1%

Top Banks Providing Loan Against PPF

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:

Axis Bank Canara Bank
State Bank of India Union Bank of India
Indian Bank ICICI Bank
Bank of Baroda Bank of India
IDBI Bank Punjab National Bank
Indian Overseas Bank Allahabad Bank

Eligibility Criteria For Loan Against PPF

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.

Documents Required For Availing Loan Against PPF

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.

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Features & Benefits of Loan Against PPF

Taking a PPF loan is a strategic financial opportunity as it offers many features and benefits to the PPF account holder, these are:

  • Loans against PPF offer lower interest rates as compared to other loans. The interest rate is set at 1% higher than the applicable PPF account interest rate. With the current interest rate for a PPF account being 7.1%, the rate of interest for loans against PPF stands at 8.1%.
  • Individuals can take a maximum loan amount of 25% of their available balance at the end of the second year immediately preceding the year the loan is applied for.
  • A PPF loan can only be taken in between the third and sixth financial year.
  • The tenure for a loan against PPF is 36 months.
  • Only one loan can be availed in one year.
  • A second loan can be availed only after the fist loan has been paid in full.
  • The principal amount is paid off first, followed by the accumulated interest. If the principal amount has been paid in full at the end of the tenure, but a portion of the interest is remaining. Then the amount will be deducted from the account balance.
  • If the loan is not repaid within 36 months, the interest rate will increase to 6% from 1%.

Loan Amount for Loan Against PPF

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.

How to Apply For Loan Against PPF

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.

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Frequently Asked Questions

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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