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Steps to take a loan from Public Provident Fund (PPF)

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The Public Provident Fund(PPF) offers some benefits for its subscribers if they are facing difficult financial situations. Despite the fact that this tax savings instrument has a lock-in period of 15 years, PPF members can make partial withdrawals from their contributions from the commencement of the 7th year of the scheme. In addition, subscribers can even take a loan against PPF between the 3rd and the 6th year since the initiation of the scheme. To take a loan from PPF, all that the subscriber is required to do is to fill in Form D with all the necessary details and submit it at the post office or bank holding his/her PPF account. The features, advantages and steps to take a loan against one's PPF account are discussed below.

Advantages of taking a loan against PPF

  • The loan is unsecured, in other words, no collateral is required for taking a loan from one's PPF account.

  • The interest is much lower that availing one from a credit lender, bank, etc. For loans taken from PPF, an interest of 2% over the current PPF interest rate is charged.

  • Subscribers have a maximum of 36 months to repay the loan.

  • If the subscriber fails to repay the loan within 36 months, he/she is charged 6% (over the current PPF interest rate) on the outstanding balance.

Features and benefits of taking a loan against PPF

  • As already mentioned, the loan against PPF is unsecured, meaning that no collateral is required.

  • No much documentation required. The subscriber has to submit Form D at the post office or bank holding the bank account.

  • From the point of applying for a loan against PPF, the money is usually disbursed within 7-10 days.

  • Subscribers can take a loan against PPF from the beginning of the 3rd financial year since the commencement of the scheme till the end of the 6th financial year.

  • The loan interest rate is 2% over the current PPF interest rate.

  • The interest rate is fixed and charged on the total principal.

  • PPF subscribers can avail a loan up to 25% of the balance at the end the second year.

  • The loan has to be repaid within 36 months. The repayment can be done in the form of monthly installments or a lump sum repayment.

  • Subscribers can even avail a second loan provided that the first loan is fully repaid.

  • Loan against PPF is allowed only once every financial year.

Conditions for availing a loan against PPF

  • PPF subscribers can avail a loan against PPF only if they have maintained the minimum subscription for each financial year.

  • If the loan is availed on behalf of the minor, the guardian or parent of the child has to make a declaration stating the money will be used to benefit the minor.

  • Subscribers can avail loans against PPF only till the end of the 6th financial year from the commencement of the scheme.

  • PPF members can avail loans only up to 25% of the balance in the PPF account that has accumulated in the preceding year. For example, if the subscribers is availing a loan in the 3rd financial year of the scheme, he/she can avail a loan 25% of the first year's balance. If he/she is availing a loan in the 4th year, the loan amount will be limited to 25% of the outstanding balance at the end of the second year.

Steps to take a loan against PPF balance

  • Subscribers have to fill in Form D and submit it at the bank or post office holding the PPF account.

  • Along with this, the subscriber has to state their PPF account number, amount of the loan and state if one has already availed any PPF loans.

  • The subscriber has to also submit a copy of his/her passbook.

  • The Form D and passbook of the subscriber is then submitted for verification.

  • Once the loan is approved, the subscriber can expect the amount to be credit to his/her bank account within 7-10 days.

Considering that the PPF is a long-term tax savings instrument, it is advisable to not avail a loan against PPF as it affects your overall returns at the end of the scheme. The loan option is granted to keep subscribers enrolled in the scheme, and an option if he/she faces a financial crisis. The PPF loan is a small time loan that can be used in case of an emergency, but as mentioned below, it is important to keep your savings intact till maturity in order to build a sufficient retirement corpus.


This article was written by anisha deepak for on .

This article published in collaboration with Scutify, the best app for traders and investors. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

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