The current Corona period is proving to be a very difficult phase on the health front as well as the economic front. Many people are facing problems from declining business, from salary cut to job loss. Economic crisis has arisen in front of such people. To cope with this situation, some people are taking help of loan. If no one has any base or guarantee to take a loan but has opened a Public Provident Fund (PPF) account, then a loan can be taken on PPF. Since PPF is a long-term savings option, in such a situation, people can avail loans on PPF before the maturity period can be used at the time of need.
The PPF account can be availed in the year it is opened, after the completion of one year and after completion of 5 years. After completion of 5 years of the account, it can be withdrawn. PPF cannot be availed after withdrawal of withdrawal from the account. At the end of the first two years of the year in which you are applying for a loan, up to 25 per cent of the amount in the PPF account can be taken as a loan.
Rate of interest and loan repayment period
On taking a loan on PPF, the principal amount of the loan is to be repaid first, principal after that. The principal amount can be repaid in two or more installations or monthly installations. The principal amount of the loan has to be paid by the account holder from the first day of the month till the end of the 36 months.
The effective interest rate for the loan is only 1 percent more than the interest on PPF. Interest can be paid in two monthly installments or lump sum. If you have paid the principal amount of the loan within the stipulated time, but some part of the interest is left, then it is deducted from your PPF account.
If the loan is not repaid within a period of 36 months or is only partially paid, then the remaining loan amount will be charged at the rate of six per cent per annum. This six percent interest rate will remain from the first day of the next month to the last day of the month in which the loan is paid. That is, the interest rate which was becoming 1 percent earlier, if the loan is not repaid within 36 months, it will become 6 percent from the beginning of the loan. If the account holder dies, his nominee or legitimate heir will pay his loan interest. The interest rates on PPF vary on a quarterly basis, but the loan rate will remain the same till the loan is repaid as decided at the time of taking the loan.
Loan will not be available on inactive PPF account
Remember, if your PPF account is not active, then you cannot take a loan on it. Apart from this, until the first loan taken on PPF is repaid, the second loan cannot be taken on it. If an account has been opened in the name of a minor or someone with a weak mind, the guardian can apply for a loan on his behalf. For this, a certificate has to be submitted in the accounts office on his behalf.
Ms Kalinga