If you are eligible for this, then you will not get a loan cheaper than this. You can take a loan from your PPF account at an interest rate of just one percent if needed. This loan can be taken from any bank or post office.
Public Provident Fund i.e. PPF account is generally considered to be a tax-saving investment. However, its benefits are not limited to this. If needed, PPF account can also get you the cheapest loan (Loan On PPF). The interest on this loan (PPF loan) is also charged at the rate of only one percent.
Not everyone can get PPF loan
However, not everyone can get this loan. As per the rules related to PPF loan, if your PPF account has been opened for three years to six years, then you can take a loan at just one percent interest.
Suppose you started a job in 2015 and your PPF account is opened. In this situation, you can take a loan against PPF between 2018 and 2021. The most important thing about this loan is that you can take it for a maximum period of 36 months. That is, you have to repay this loan in 36 months.
Interest will increase if not paid in 36 months
It is possible that your circumstances have not been right and you have not been able to repay the loan in 36 months, so the interest will increase after 36 months. For the stipulated period where you were paying only one per cent interest, after that you will have to pay six per cent interest. Only one loan can be taken on PPF account at a time. If you have taken a loan once, unless you repay it, you will not be able to get another loan.
Another special thing about loan against PPF is that even after taking the loan, you keep getting interest on the remaining amount. Think of it like this with an example. If you have one lakh rupees in your account and you have taken a loan of 50 thousand. In this situation, 50 thousand rupees are left in your account. On this remaining 50 thousand, you will continue to get the fixed interest of PPF, which is currently 7.1 percent (for April to June 2021).
Loan can be availed on PPF account
In Loan Against PPF, you can get only a part of the amount available in the account. You can take a loan of up to 25 percent of the amount that was in your account two years before the year in which you are applying for the loan. Suppose you are applying for a loan today i.e. on 30th September 2021. This is the fiscal year 2021-22. In such a situation, you can get a loan equal to 25 percent of the amount available in the account at the end of 2019-20 i.e. on 31st March 2020.
After 6 years of PPF account, you can withdraw some part of it if needed. This withdrawal is the same as if you would withdraw from a normal savings account. In lieu of this, you do not have to pay any interest.
This is the process of Loan On PPF
You will need to fill Form D to get a PPF loan. In this form, you will have to tell that from which PPF account you want to take the loan. Along with Form D, you will also have to provide a copy of the PPF account passbook. You can take this loan from any bank or post office.
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