Loan Against PPF Account, Loan on PPF Account
Loan under PPF account is available. Loan can be availed only between the 3rd and 6th financial year after you open a PPF Account. The loan amount is limited by your PPF balance.
There is some limitations on availability on PPF loan amount. PPF Loan amount cannot exceed 25% of the amount that is available in the account at the end of the second year.
For example, if you opened your account on June 15, 2012 (FY 2013), you can take loan from the beginning of 3rd financial year (FY 2015) i.e. April 1, 2014 till the end of 6th financial year (FY 2018) i.e. March 31, 2018.
When can the Loan against PPF be Availed?
Loan against PPF can be availed only when:
Your account has to be regular for you to avail this facility.
You can take loan only once in a year.
Even if you have repaid the loan taken against PPF within few months, you cannot avail loan twice against your PPF account in the same financial year.
You cannot have two loans against PPF account outstanding at the same time.
Rate of Interest Charged on Loan on PPF Account
Interest rate on loan against PPF is 2% over the prevailing PPF interest rate while availing the loan. For example, if the PPF interest rate is 8.00%, then the interest rate on loan will be 10.00% p.a.
How to Repay Loan against PPF?
The loan must be repaid within 36 months from the first day of the month in which the loan is sanctioned. For example, if you availed the loan on say July 10, 2015, you have to repay the loan by July 31, 2018.
You are allowed to repay the loan as lump sum or in one or more monthly installments.
What happens in case you do not repay the Loan on Time?
In case, you do not pay the principal amount within 36 months of availing the loan, then the interest rate on loan will be increased to 6% above PPF rate and such interest will be debited from your PPF balance at the end of every financial year.
In case you repay the principal amount within 36 months of availing the loan but do not pay its accrued interest, then the interest will be debited from your PPF balance at the end of 36 months.