How to get loan against PPF – Public Provident fund is not just a good social security scheme but it also provides many other benefits in the form of deduction while computing the total taxable income and earns a good amount of interest at no risk. Apart from these benefits it also provides a facility to avail a loan against it. in this article, we provide complete details for How to get a loan against PPF like – Eligibility criteria for a loan against PPF, Amount of loan, Rate of interest, Procedure to take a loan against PPF etc.
Normally PPF account is opened in a post office or a Bank by paying a very Nominal opening fees. This investment also serves as a tool to rescue you at the time of retirement.
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Eligibility for loan against PPF :
(1) Loan can be availed only after completion of 1 financial year apart from the year in which it has been opened. For example if one opens a PPF account in December 2013 then he will be eligible for loan against PPF in the year 2015-16 i.e after Mar 31 2015.
(2) The Eligibility for availing loan will be available for 5 financial years from the year it becomes eligible. For example, in the above example, he opened a PPF account in December 2013. He becomes eligible after March 31 2015. The 5 years limitation starts from this 2015-16 financial year.
(3) Second loan can be taken within the eligible years provided the first loan is settled.
(4) If a Public Provident Fund (PPF) becomes eligible for withdrawal of pf money then he becomes ineligible to avail the Loan against PPF.
(5) In one financial year only one loan can be taken even the first loan is repaid. Loan has to be repaid within 3 years from the date of sanction.
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Amount of loan :
If you take the loan in the first year it becomes eligible, The loan can be taken up to a maximum of 25 per cent of the balance lying in your account at the end of the first financial year. If you take loan in the next year it becomes eligible the balance lying in the account at end of second year of its opening will be considered.
Rate of interest :
Interest will be charged at a rate 2 % higher than that is being earned on PPF. For example if the PPF is earning 8% then the loan will carry 10% (8+2) interest rate. If the loan is not repaid Within 3 years from the date of sanction then interest rate will be 6% higher instead of 2% higher than the earning interest.
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Procedure to take a loan against PPF :
(1) First of all the form prescribed for this purpose should be filled and sent to manager of your ppf account.
(2) If you would have taken any loan against PPF earlier then its details should be attached.
(3) PPF account passbook should be attached to the application.
As it carries low amount of interest, in the cases of any requirement for loan it would be better to avail this loan rather any personal loans.
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