Need money in emergency?:Take loan against Provident Fund at lower interest rate than banks; here’s how to apply

When they need money in an emergency, most people consider borrowing from friends or relatives, using a credit card or taking a personal loan. But if you have a PPF (Public Provident Fund) account, you have another option to borrow money at a lower interest rate. In fact, PPF is not just a long-term savings and tax-saving scheme. The government also offers loan facilities based on the amount deposited in the account. This allows you to arrange money when needed without closing your PPF account or breaking your investment. However, this facility is not available to all account holders at all times. There are certain rules, time limits and eligibility conditions for availing it. So, today we will discuss loans available against PPF. We will also find out- Expert – Jitendra Solanki, Financial Adviser, Ghaziabad Question – What is a PPF account? Answer – Understand it through these pointers: Question-Who can take a loan against a PPF account and when? Answer-Understand it through these pointers: For example- Question- How can you get a loan against a PPF account? Answer- Understand it through these pointers: Question- How much loan can be taken against PPF? Answer- You can take a loan of up to 25% of the balance in your PPF account from two years earlier. For example- Suppose ₹4 lakh was deposited in your PPF account on 31 March 2025. In this case, you can take a loan of up to ₹1 lakh. Question-What is the interest rate on a PPF loan? Answer- The interest rate on a PPF loan is not fixed separately; instead, it is linked to the interest rate applicable to your PPF account. Under the current rules, the loan has to be repaid at an interest rate 1 percentage point higher than the interest rate applicable to PPF. If PPF is earning annual interest of 7.1%, the effective interest rate on the PPF loan will be 8.1% per year. Question-What is the complete process for taking a loan against PPF? Answer- Understand it through the following pointers: Step 1: Check your eligibility for a PPF loan Step 2: Apply at the bank or post office Step 3: Submit the required documents Step 4: The application and documents will be verified Step-5: The loan amount will be credited to your account See the list of documents required for a PPF loan in the graphic- Question-What will happen if you are unable to repay the loan on time? Answer- Understand it through these pointers: Question – What are the benefits of taking a loan against PPF? Answer – There are several benefits to taking a loan against PPF, especially when money is needed for a short period at a low interest rate. See all its benefits in the graphic: Question: What is the difference between a PPF loan and a personal loan, and which option is better? Answer: Which option is better depends on your needs and eligibility. See the graphic: Question: Is a PPF loan cheaper than a personal loan and a credit card? Answer-Yes, PPF loans are generally cheaper than personal loans and credit cards. This is because the interest charged on a PPF loan is only 1% higher than the interest rate applicable to the PPF account. Interest rates on personal loans and credit cards, on the other hand, are generally much higher. Question-Is it better to take a PPF loan or a personal loan in an emergency? Answer-It depends on your needs and eligibility, such as- Question: Does a loan taken against a PPF affect the CIBIL score? Answer- Usually, no. A PPF loan is granted on the basis of the amount deposited in your own PPF account. Therefore, your CIBIL score is generally not checked for it. This is why a PPF loan does not directly affect your CIBIL score. Question- What impact does taking a PPF loan have on the maturity, interest or tax benefits of a PPF account? Answer – Usually, taking a PPF loan does not affect the maturity, interest or tax benefits of your PPF account. However, the principal and interest on the PPF loan must be repaid within the stipulated period. Delays may result in additional interest being charged, but this has no connection with the maturity or tax benefits of the PPF account. Graphics – Gaurav Raj