While personal loans are fast processed, a loan from your PPF account will give you a lower interest. In the event of an emergency, which one would serve you better? Find out the difference between a personal loan and loans from the balance of your PPF account.
Achieving a happy life free of unexpected financial crises takes time to complete. Anyone could face a sudden financial problem and need an advance loan to cover the costs. Additionally, when the situation is urgent, it is best to choose the most efficient method of credit.
A personal loan could be the first thought that pops up in everyone’s head since it is completed in 24 hours, and the money can be immediately into your account. But is it the best choice? What are the high fees for interest?
If you’re salaried and your employer takes PF from your wages, if you’ve had a long tenure in employment and a long tenure, your PPF account will be able to hold an impressive amount of money. You may also take the form of a cash loan out of your PPF account to cover these emergencies.
How do I choose which one to choose? What are the main factors to consider when choosing one of these loans? Here’s a brief list of pros and cons to aid you in the decision-making process.
Let’s take a look at a few of the elements in greater detail to provide more clarity:
1. Loan Amount: The primary reason to get a loan is that we need help to organize the funds. Thus, the best option is to choose credit options that offer more than the loan amount. Personal loans may provide upwards of Rs.25 lakhs or more excellent loans, depending on your income and repayment capacity. However, the loan against PPF is limited to 25% of the money accrued in the past two years on the PPF account. It’s only significant if your earnings are large or you’ve been employed for a long. Thus, a personal loan is likely the best option for substantial expenses like a wedding, higher education, or even a trip abroad.
2. interest rates are another essential aspect when choosing the right loan. Personal loans are not secured loans, meaning they have an interest rate of between 10 and 25 percent per year. However, PPF Loans charge you only one percent of the interest. However, you will get the PPF interest on your loan amount once you have paid it back. Thus, the real interest rate would be the PPF interest rate plus 1 percent, which will still be less than personal loans usually cost.
3. The longer the repayment duration, the more favorable the credit. You must be able to repay the loan with ease. Therefore, personal loans are ideal since they can provide up to 5 years of repayment. However, PPF loans must be paid back in 3 years. The repayment term is the best option if the loan amount is significant.
4. The number of times you can take out a loan with PPF credit; you could take only one loan over a year. With a personal loan, you could receive multiple loans within a year. This can be a benefit to accommodate different needs or to get another loan that can be used to top up the exact cost.
The verdict – If you’re in a rush and require a large amount, look to personal loans. PPF loans are outstanding for planning expenses.
PPF loans are affordable for those who don’t need to get a large amount of money and also pay high-interest rates. PPF loans are outstanding for less expensive expenses like college fees, a minor medical procedure, home repairs or renovations or renovation, etc. Suppose the cost is high such as an essential medical emergency, international vacation or marriage of children or higher education at foreign universities, and other such things. In that case, you may get a personal loan that will allow you to borrow more and an extended repayment time.
