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Loan Against PPF vs. Personal Loan: Everything You Need to Know
Posted on Thursday, October 24th, 2024 | By IndusInd Bank
During your financial journey, you must have found yourself in a situation where a large, sudden expense rises. Such a situation, whether it is a medical emergency, an unavoidable home renovation, or an urgent purchase, can throw your finances off balance. These unexpected costs can be overwhelming. Hence, finding the right financial solution is crucial.
Two popular options you can consider for managing such expenses are a loan against your Public Provident Fund (PPF) and a personal loan. But which one is better? Let’s dive into the details and help you make an informed decision.
Loans Against PPF: A Hidden Gem
A loan against PPF is a beneficial option that many people tend to overlook. If you have a PPF account, you can borrow money against the PPF balance without the need to break into your savings. This option allows you to preserve your long-term savings while addressing immediate financial needs.
How Does a PPF Loan Work?
When you opt for a PPF loan, you can borrow up to 25% of the balance in your PPF account. But if you’re applying in the financial year 2024-25, the balance as of 2022-23 is considered.
The loan tenure is typically three years. The interest rate is just 1% higher than the current PPF interest rate. As of now, the PPF loan interest rate is around 8.1% annually, given that the PPF interest rate is 7.1% per annum. The process is straightforward, and the loan is disbursed quickly, since your PPF account serves as collateral.
Personal Loans: A Flexible Option
Personal loans are a popular financing option because of their flexibility and ease of access. Whether you need funds for a wedding, education, or an emergency, a personal loan can cover it. Personal loans tend to be unsecured. This means you do not need to provide collateral.
How Do Personal Loans Work?
Personal loans allow you to borrow a lump sum and repay it over a fixed tenure, usually between one to five years. The loan amount and interest rate depend on various factors, such as your credit score, income, and relationship with the lender. Choosing a bank that offers a competitive personal loan interest rate is recommended to reduce your interest outgo.
Comparing Loan Against PPF vs IndusInd Bank Personal Loans
Now that we have a basic understanding of both loan types, let’s compare them on key parameters to see which suits your needs better.
| Criteria | Loan Against PPF | IndusInd Bank Personal Loan |
| Interest Rates | The interest rate is 1% above the PPF interest rate. The cost of the loan depends on your PPF interest rate. | The Interest rate starts from 10.49% per annum. Rates are subject to change. |
| Loan Amount | Limited to 25% of your PPF balance from the year before your application. | You borrow any amount ranging from ₹30,000 to ₹50 lakhs. |
| Loan Tenure | Tenure is fixed at three years. Must be repaid within this period; unpaid amount is adjusted against your PPF balance. | Flexible tenures ranging from one to six years. Choose a repayment period that fits your financial situation. |
| Risk and Collateral and Usage | Secured loan with your PPF account as collateral. Limited usage as it is backed by your savings. | Unsecured loan. No restrictions on usage as it is not backed by collateral. |
Personal Loans from IndusInd Bank offer notable advantages over loans against PPF. With flexible tenures, higher borrowing limits, and no collateral requirements, they provide greater financial freedom and ease of use. The fixed interest rates also ensure predictable payments, making personal loans a more versatile and accessible option for a range of financial needs. Choosing a personal loan can simplify your financial planning and give you the flexibility to manage your funds effectively.
Also Read: Mini Loans or Small Personal Loans: All You Should Know
Conclusion
Opting between a PPF loan and a personal loan depends on your financial situation. Make an informed choice and ensure your financial well-being. Both loans against PPF and personal loans have their advantages and drawbacks. If you have a substantial PPF balance and need a smaller loan with a lower interest rate, a PPF loan could be ideal. However, if you require a larger sum and value flexibility, a personal loan might be a better fit.
If you are opting for a Personal Loan, it is crucial to understand your financial needs and choose the right banking partner. IndusInd Bank offers tailored Personal Loans with competitive interest rates and flexible repayment options. Use the Personal Loan EMI calculator and find the best loan option for you.
Apply now for IndusInd Bank Personal Loan!
Disclaimer:
The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.
