Facing money crisis in lockdown? Use your PPF Account for loan at just 1 pct interest rate

PPF Account: Public Provident Fund of PPF account is not just a deposit account, it is much more than that. In a financial crisis, which some of us may be facing due to the Coronavirus lockdown, PPF allows account holders to take a loan even against their balance. According to the tax and investment experts, taking a loan from PPF is much cheaper than other retail loans like personal loan, gold loan, loan against FD, etc. They said that loan against PPF balance is available at 1 per cent interest rate. So, if you are facing money crisis during Coronavirus lockdown, then loan against PPF balance can be a better option.

Speaking on the loan against PPF balance; Mumbai-based tax and investment expert Balwant Jain said, "Loan against PPF balance becomes available from third year of the PPF account. However, it's available from third year to sixth year only. Once your PPF account becomes six year old, you can go for PPF withdrawal."

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Comparing the loan against PPF balance with other retail loans available in the lending market; Manikaran Singhal, SEBI registered tax and investment expert said, "Loan against PPF balance is definitely much cheaper than other retail loans such as personal loan, gold loan or loan against fixed deposit (FD), but one needs to know that loan from PPF account is subject to your deposit while loan from retail banking options are subject to your monthly income. So, much depends upon the amount you need during financial crisis. If the amount you need can be availed through PPF account loan, then one should go for it."

Singhal went on to add that loan from PPF account could be taken from the third year onward till the sixth year. Let’s suppose you opened your PPF account in December 2016 (in the FY 2016-17), you can avail a loan only in FY 2016-2017 (2016+2 = 2018) till FY 2021-2022 (2016+5=2021).

You can avail a loan amount of up to a maximum of 25 per cent of the balance in your account at the end of the second year immediately preceding the year in which the loan is applied for.

If you apply for a loan in November 2018 (FY 2018-2019), you would get 25 per cent of the amount that existed at the end of March 2018.