Loans against PPF vs Personal Loan – Which is Better?

Be it unforeseen emergencies, unavoidable expenses or lifestyle spends, there are several funds in the market that may come to our rescue. Personal loans and loans against PPF (Public Provident Fund) are two such credit funds available for us and if one is planning to get a loan for accomplishing financial goals then the best thing to do right now would be to understand how these two fund services work and choose wisely.  

Understanding the Basics: Loans Against PPF vs Personal Loan

Personal Loans: These are funds that a lender or a bank disburses to individuals in need of money. This fund gets credited for a fixed tenure and an interest rate is levied on it. 

PPF: Public Provident Fund is basically a government-based term that is popular because it offers competitive interest rates and has a lock-in period of 15 years with tax-free returns. 

One can either opt for a personal loan or also think about taking a loan against the PPF if one wishes to go for a safe option. 

Loans against PPF allows us to borrow money against our PPF account balance, usually up to 25% of the amount in the account at the end of the second year preceding the loan year. On the other hand, personal loans are unsecured loans that we can use for nearly any purpose, ranging from medical emergencies to home renovations.

Also Read: What are the Various Types of Personal Loans?

Eligibility Criteria for Loans Against PPF and Personal Loans

To avail a loan against PPF, we must have a PPF account with a minimum balance. This loan can be availed between the third and sixth financial year of opening the account. Personal loans, however, require a stable income, decent credit score, and a good repayment history as part of their eligibility criteria.

Interest Rates Comparison: Loans Against PPF vs Personal Loans

Loans against PPF generally have lower interest rates than personal loans as they are secured against our PPF balance. Personal loans, though, have higher interest rates due to their unsecured nature.

Airtel Personal Loans offer amazingly low interest rates starting from 11.5%. Airtel Personal Loans offer tenure flexibility ranging from 3 to 60 months, allowing us to manage our finances better. Airtel Personal Loans, can also be availed on immediate disbursal with no paperwork needed.

Repayment Terms for Loans Against PPF and Personal Loans

PPF loans must be repaid within 36 months, while personal loan tenures are more flexible and different lenders offer different credit tenures as per the amount and interest rate of the personal loan. This tenure can also be customised as per our requirement.

Impact on Credit Score: Loans Against PPF vs Personal Loans

Both types of loans can impact our credit score. Timely repayments can boost our credit score, while defaults can negatively impact it.

Processing Time and Ease of Approval: While loans against PPF require minimal documentation and approval, personal loans may require a more rigorous check. 

The flexibility and usage in Loans Against PPF vs Personal Loans can make a huge difference in the way one might choose the funds. 

Personal loans offer more flexibility in terms of usage compared to loans against PPF. We can use a personal loan for any financial need, while a PPF loan is generally used for specific financial goals.

Risks and Consequences of Default: Defaulting on a PPF loan can lead to penalties and reduced interest on our PPF account. On the other hand, defaulting on a personal loan can lead to a lower credit score and legal action.

Tax Implications on both these categories: PPF loans do not have any tax implications, whereas personal loan interest payments do not provide any tax benefits.

Also Read: How to apply for a loan without income proof?

Making the Right Choice: Factors to Consider When Deciding Between a PPF Loan and a Personal Loan

Deciding between a PPF loan and a personal loan depends on our financial needs, repayment ability, and the urgency of the loan. If a quick, hassle-free loan with flexible repayments and a decent interest rate is what one seeks, Personal Loans could be the answer but if someone wants to go for a loan with low interest rests and if the loan amount isn’t too big, one can go for a loan against the PPF funds. 

In conclusion, while loans against PPF tend to have lower interest rates and offer tax benefits, they lack the flexibility and easy approval process of personal loans. Personal Loans, with their low interest rates, flexible tenures, and immediate disbursal, are a worthy contender for financial emergencies. As we navigate through our financial journeys, making an informed choice is the key to financial stability and success.