Benefit Of Cheaper Loans- Public Provident Fund

Cheaper loans against PPF
Almost all of us feel the necessity of loans at different stages in our live despite our best financial planning, management and savings. We have different options available to us but PPF is one option that provides you loan against your account at the rate of 2% extra on whatever the current rate you get although you might have other options open for yourself to obtain loans from other sources.

Conditions for loans on PPF
As mentioned above that you have to pay 2% extra whatever the interest at the time you apply for the loan, for instance the present interest rate applicable is 8.70% therefore you can get a loan at the rate of 10.7% from PPF account. There are few other conditions which you should fulfill before applying for a loan from your PPF account. You must apply within 3rd and 6th year for obtaining a loan and pay back within maximum three years (the limit for maximum return of loan was two years previously).  The maximum amount you can get as loan is 25% of your deposit dating back to two years before. The reason for this rule is the PPF account holder is eligible to withdraw certain amount from his account from 7th month onward, therefore the loan facility is provided up to 6th year only.

Important Points
There are two options available for repayment of interest/principal amount. You can pay your interest within/before 3 years or pay principal amount within three years and pay the interest occurred as onetime payment/monthly installments. In case a person fails to pay his dues within stipulated time limit the entire due is deducted from the PPF account at the end of concerned financial year. 

Loan Benefits of PPF account  
A PPF account is more beneficial in the sense that all allowed investments, interest gains and maturity amount are free from tax liabilities (up to 1.5 lacks under income tax provision 80C). The tax rebate makes PPF more attractive as it is exempted from Tax Deduction on Source. There is an important point to keep in mind that calculation of interest dates taken in to account is valid in between the balance available on 5th and last date of a month so it is more beneficial to deposit funds before 5th of every month.

Article Posted By : sunylView All Articles


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Keywords :
PPF , Loans , Interest , Extra , Benefit , Return , Tax , Free


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