Personal Loan vs Loan Against PPF – Which one to Choose and why?

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Numerous times individuals are prepared to surrender their investment funds/ savings for battling with a crisis. Everybody saves considering a specific vision, that might include the kid’s schooling, buying a home or vehicle, marriage, retirement, or whatever else. Yet at the same time, in the hour of crisis, they will go through reserve funds that were saved for those dreams. In case of sudden requirements, or funding to fulfill an aspiration, availing a loan instead of utilizing one’s investments is always a better choice. Taking a loan has become extremely easy and cost-effective these days. Indeed, even there are different sorts of loans accessible to today’s borrowers depending on their needs, eligibility, and potential. One can pick the loan option which best suits their necessities.

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Which Loan is Best Suited for me?

For meeting cash crunch issues in crises, an online personal loan, and a loan against the PPF are popular choices. These loans can be utilized for any motivation behind one's desire. Though both a personal loan and loan against PPF can be used to meet any of your needs, there are some differences between these products that one must consider while weighing their options. Allow us to show the distinction between a loan against PPF and an online personal loan. The below table depicts a comparison for both these products, that may be used to make an informed decision.

 AREA PERSONAL LOAN LOAN AGAINST PPF

 Loan Amount

Upto INR 25 lakhs* depending on the borrower’s personal loan eligibility

Upto 25% of the balance available by the end of the 2nd financial year after opening the PPF account.

Loan Tenure

Between 12 to 60 months

-Upto 36 months

Frequency and Availability

Borrower can apply whenever he/she has a financial requirement, whenever they want as per their eligibility

Between 3rd & 6th year of the PPF, only partially from the 7th year onwards. This can be availed only once a year

Interest Rate

starting from 11.99% per annum onwards

Lower when compared to interest rates of personal loans

Processing Time

Funds are disbursed shortly after final approval

Can be availed very quickly

Suitable for

Requirement of a larger amount which needs a longer tenure in order to keep the EMIs affordable

Short funding needs which can be repaid within a few months.

Explanation of the areas to consider.

1. Loan Amount:

The maximum loan amount which you can avail with a loan against PPF is 25% of your deposited amount. If you have deposited an amount of INR 1,00,000 then the maximum loan amount that can be availed is INR 25,000. But if you go for a personal loan online then your loan amount will depend on your repayment capability and your credit score and can go as high as INR 25,00,000*. You can use a personal loan eligibility calculator to know the maximum amount you may be able to get. 

2. Loan Tenure:

The loan tenure of both kinds of loans is different. The maximum loan tenure for a personal loan is 5 years whereas the maximum loan tenure of a loan against PPF is only 3 years. So, a shorter tenure means you are to pay a higher EMI. A higher EMI can obviously become a burden on any borrower.

3. Borrowing Frequency and Availability:

A loan against PPF can be borrowed only once in a financial year. Even if you have repaid the entire amount of your previous loan, a second loan on PPF in the same financial year is not allowed. But a personal loan online is different. Personal loans can be availed multiple times within a year provided your lender is ready to lend you, as long as you meet the eligibility criteria.

A Loan against PPF can only be availed between the 3rd and 6th year, and only partially from the 7th year onwards. On the other hand, one can take a personal loan whenever they need, as long as they match the eligibility criteria.

4. Interest Rate:

The interest rate of a loan against PPF is 2% more than the interest rate offered by the bank on the PPF balance provided you repay the loan amount within 3 years. If you are unable to repay the loan amount in 3 years, then the interest rate jumps to 6% more than the current rate offered on PPF balance. The interest rate jumps to 6% more than the current rate offered on PPF balance. This is usually lower when compared to that of the interest rates of personal loans, which start at 11.99% per annum.

5. Second Loan Against PPF can be Taken after the Repayment of the First Loan:

Just like personal loans, we can avail multiple loans against PPF. But unlike personal loans, you can avail a loan against PPF only after you have completed replaying the first loan. Personal loans are exceptional in this regard.

6. Processing Time:

If you are in an urgent need of cash then a loan against PPF may take a shorter time for processing compared to an online personal loan, where the funds are disbursed within 30 minutes - 24 hours* of final approval.

7. Suitability:

As mentioned in point #4, a loan against PPF may be a good option for those who have emergency funding requirements and they can easily repay the loan within a few months. A personal loan is a wiser choice when one needs a lump sum amount with the flexibility of repayment upto 5 years so that the resulting EMI is affordable. This is also true since the interest rates on personal loans are charged on an annual basis.

While we don’t offer loan against PPF at the moment, Fullerton India offers attractive interest rates on Personal Loans upto INR 25 lakhs* to eligible applicants. Apply today to know more.

*Terms and conditions apply. Loans are provided at the discretion of Fullerton India.

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