Avoid taking a loan unless you want to buy a long term asset. But sometimes such an emergency comes in life that one has to take a loan. Whenever there is such a need, one should also avoid putting in the emergency fund. However, despite all kinds of financial planning, we all need a loan at some point or the other. People turn to personal loans for sudden expenses, but experts say that if you want to take a loan for a large amount for a short period, then the loan against your PPF account can be taken.
Personal Loan or PPF Loan
People generally take a personal loan for any emergency expenses. But some personal finance experts believe that apart from personal loan, loan can also be taken against PPF account. Prithvi Chandrashekhar, Head of Risk & Analytics at InCred Finance, says that it is important to consider a few things while choosing between a PPF loan and a personal loan.
Who can take personal and PPF loan?
Good credit score, age of the customer and regular income are the decisions taken while granting a personal loan. On the other hand, you can take PPF loan between the third to the sixth year of opening the PPF account, that means if you have opened a PPF account in the financial year 2015-16. So you can take a loan from the financial year 2017-2018. However, you can take a loan only till the financial year 2020-21.
How much loan can I take?
There is no ceiling on the maximum loan amount in a personal loan. It depends on the scale of the loan being given by the bank. Personal loan interest rates are also very high. Usually, 10 to 20 percent interest is charged on it annually. Whereas on taking a loan from PPF, only one percent interest is charged on the loan amount. But it should also be kept in mind that no interest is paid on your PPF contribution till the repayment period of the loan. So in this way your interest rate is equal to the interest received on adding one percent to the interest rate on PPF. If 7.10 percent interest is being received on PPF contribution, then 8.10 percent interest will be applicable on the loan. Chandrashekhar says that loan for PPF should be taken when you need a large amount for a short period of time.
loan repayment period
Personal loan is for a maximum tenure of six years. Whereas the personal loan has to be repaid in three years.
interest rates
Since personal loans are unsecured, their interest rate is high i.e. between 10 to 20 percent. Whereas the interest rate on PPF is one percent more than the contribution being received on it.
(Article: Amitava Chakarvarty)
Get Business News ,, latest India News ,, and other breaking news on share market, investment scheme and much more on Business Khabar. Like us on Facebook, Follow us on Twitter for latest financial news and share market updates.
.