If you need a loan and have a Public Provident Fund (PPF) account, you don’t need to worry. PPF is a long-term investment and a retirement savings plan. You must deposit at least Rs 500 in this account every year, and the maximum limit is Rs 1.5 lakh per year. According to PPF rules, the account matures in 15 years, but you can extend it for another five years. If PPF account holders meet the government’s conditions, they can get a loan against their PPF during a financial crisis. However, it is important to understand the rules before applying.

How to Get a Loan on PPF

If your PPF account is more than three years old, you can easily get a loan against it. However, this loan can only be taken for six years. Also, you cannot borrow the entire amount in your PPF account. You can borrow a maximum of 25 percent of the balance in your account from two years before the year you are applying for the loan. According to India Post’s website, “A loan of up to 25 percent of the amount that was in the account two years before the year the loan is being taken can be taken.”

Interest Rate on PPF Loan

The interest rate on a PPF loan is usually 1 percent higher than the interest you earn on your PPF account.

Loan Repayment Timeline

The principal amount of the loan must be repaid within 36 months from the month your loan is approved. You can repay the loan in one lump sum or in two or more monthly instalments within 36 months.

Benefits of Taking a Loan Against a PPF Account

  • A PPF loan is personal, so there is no need to pledge any asset as collateral.
  • Loan repayment is flexible and can be done in instalments or as a lump sum.
  • The loan tenure is 36 months, giving the account holder sufficient time to repay.
  • The interest rate on a PPF loan is only 1% per annum, making it a cost-effective borrowing option.

Important Points to Remember

  1. Your PPF account must be active to take a loan.
  2. You can only take a loan between the third and sixth year of your PPF account.
  3. Partial withdrawal is allowed from the seventh year, so loans cannot be taken after the seventh year.
  4. Withdrawals are not allowed from the PPF account before the sixth year.