How to take a loan against PPF?
Taking a loan against your PPF (Public Provident Fund) account involves a straightforward process. Here are the steps to follow:
1. Check Loan Eligibility: Ensure that you meet the eligibility criteria for availing a loan against your PPF account. You can avail of a loan from the 3rd financial year up to the 6th financial year from the opening of the account.
2. Visit the Bank or Post Office: If you want to take a loan against your PPF account, visit the bank or post office where you hold your PPF account. Ensure that the bank or post office provides loan facilities against PPF accounts.
3. Fill Out Loan Application Form: Obtain the loan application form for availing a loan against your PPF account. Fill out the form with accurate details, including the loan amount you wish to avail of and the purpose of the loan.
4. Submit Required Documents: Along with the loan application form, submit any additional documents required by the bank or post office. Typically, you will need to provide your PPF passbook and proof of identity/address.
5. Loan Amount Calculation: The maximum loan amount you can avail of is 25% of the balance in your PPF account at the end of the second financial year immediately preceding the year in which the loan is applied for.
6. Loan Disbursement: Once your loan application is processed and approved by the bank or post office, the loan amount will be disbursed to your linked bank account or provided as a demand draft, as per the bank’s or post office’s procedure.
7. Repayment Terms: Repayment of the loan against your PPF account must be made within a specified period, typically within 36 months from the first day of the month following the month in which the loan was sanctioned.
8. Interest Rate on Loan: The interest rate charged on the loan against your PPF account is usually 1% to 2% higher than the interest rate earned on your PPF deposits. The exact interest rate may vary depending on the policies of the bank or post office.
9. Interest Payment: The interest on the loan must be paid along with the principal amount in equated monthly installments (EMIs) or as per the repayment schedule provided by the bank or post office.
10. Maintain PPF Account: It is important to note that even after availing of a loan against your PPF account, you must continue to maintain your PPF account and fulfill the prescribed deposit requirements to keep it active and avoid any penalties.