In case of emergency, people either fulfill their need of money by borrowing money from someone or they complete their work with the help of credit card, personal loan etc. Here know the way by which you can get a cheap loan and you can easily fulfill your need of money.
Solid arrangement of cheap loan: Emergency situations can come before anyone and in such a situation, money is needed the most. People fulfill their need of money either by borrowing money from someone or by taking help of credit card, personal loan etc. Your need is fulfilled with personal loan, but in return you have to pay a lot of interest. On the other hand, if you have taken help of credit card and are not able to repay the amount in the grace period, then also you may have to pay a lot of interest.
In such a situation, the facility of PPF loan can be very helpful for you. The government provides loan facility on Public Provident Fund. It is much cheaper than personal loan and there is a good amount of time to repay it. But only those people can avail this facility who have invested in PPF. Let us tell you the special things related to the loan available on PPF.
Benefits and interest rates of loan against PPF
If you avail loan facility on PPF at the time of need, you get two benefits. The first benefit is that you do not have to mortgage gold or property as security for this loan because this loan is given to you on the basis of the amount deposited in the PPF account. The second benefit is that its interest rate is better than any unsecured loan. According to the rules, the interest rate of PPF loan is only 1% higher than the interest rates of PPF account. That is, if you are getting 7.1% interest on PPF account, then you will have to pay 8.1% interest on taking a loan.
You get enough time to repay
There is a good amount of time to repay the loan taken against PPF. It has to be repaid within 36 months i.e. maximum three years. PPF loan can be repaid in two ways – first, either you repay it in lump sum or the second way is to repay it in installments. If you are unable to repay the loan within 36 months, then as a penalty, you will have to repay the loan at an interest rate 6 percent higher than the interest received on PPF. First of all, you have to repay the principal amount of the loan. Later, interest is calculated according to the payment period.
How much loan can you take?
Keep in mind that loan facility on PPF is available only to those whose account is at least 1 year old. You can take up to 25 percent of the amount deposited in your PPF account as loan. Suppose your PPF account is three years old and you have deposited Rs 3 lakh in this account at the rate of Rs 1 lakh per annum, then you can take 25 percent of 3 lakh i.e. Rs 75,000 as loan.
Loan facility will not be available after 5 years
If your PPF account has completed five years, then loan facility will not be available because after this you get the facility of partial withdrawal from the account. One more thing to understand is that you can take loan on PPF account only once. Even if you have repaid the previous loan on time, still you do not get the facility of loan on this account again.
How to apply
To avail the loan facility on PPF, you have to go to the branch of the bank or post office where the PPF account is open and apply for the loan by filling the form. Form D is used for this in SBI. Along with this, the loan amount and the repayment period have to be written in an application. If you have taken any loan before, then you have to mention it as well. After this, the PPF passbook has to be submitted. After the whole process, the loan is approved within about a week.
