There are many benefits of investing in a public provident fund (PPF) account, one of which is to take a loan at the time of need.
PPF Loan: There are many benefits of investing in a public provident fund (PPF) account, one of which is to take a loan at the time of need. Yes, you can also take a loan on PPF account. Instead, you do not have to pledge anything and the interest rate is also low. Apart from this, it is also easy to repay the loan. From the end of the year in which you opened your account on PPF, you can take a loan anytime after the next year.
You can apply for loan within the next five years from the end of the year of opening of PPF account. In this, up to 25 per cent of the amount in the account at the end of the first two years of the year in which you are applying for the loan can be taken as a loan.
Will get a loan in a year
If an account has been opened in the name of a minor or someone with a weak mind, the guardian can apply for a loan on his behalf. For this, a certificate has to be submitted in the accounts office on his behalf. The PPF account holder will get the loan again only after paying the loan with interest before that. If you have not paid the entire amount of the loan along with interest, then a new loan will not be given. A PPF holder can take only one loan in a year.
Loan interest and repayment
The principal amount of the loan has to be paid by the account holder from the first day of the month till the end of the 36 months. You can also pay it in lump sum or in installments. After paying the principal amount in full, the account holder will have to pay interest in two monthly installments at an annual rate of one per cent of the principal amount. This principal amount will be the principal amount during the period from the first day of the following month to the last day of the month in which the last installment was paid.
If the loan is not repaid within a period of 36 months or is only partially paid, then the remaining loan amount will be charged at the rate of six per cent per annum. This six percent interest will be from the first day of the next month to the last day of the month in which the loan is taken. That is, if the loan could not be repaid within 36 months, the interest rate which was becoming 1 percent earlier, will become 6 percent from the beginning of the loan.
Interest on the outstanding loan will be taken from the account holder’s account at the end of every year if it is not paid before the end of the 36-month period. If the account holder dies, his nominee or legal heir will pay the interest on his loan.
If your PPF account is not active, then you cannot take a loan on it. Apart from this, until the first loan taken on PPF is repaid, a second loan cannot be taken on it.