Personal loan vs PPF loan: Which is Better? 

Whenever there is a stressful financial situation, a loan is a prior option for help. However, there are many people who, instead of taking a loan, prefer to utilise their savings, even if they need to reduce their emergency funds. However, if you carefully analyze your loan situation, requirement, purpose, and your capacity of repayment, the loan can be a lifesaver and you don’t need to touch your savings, which are for critical situations. 

When it comes to loan options, the two most common options are Personal loans and a Loan Against PPF. In this article, we will understand how these loan types differ from each other and which is the better option for you. Let’s begin with the basics. 

What is a Personal Loan? 

In a personal loan credit option, there is no need for collateral, plus there is no usage restriction. There are reputed lending institutions like Rupee112 that provide personal loans at competitive financing costs. Rapid approval, online application, and a simple process are major advantages of a personal loan.  

With a personal loan, you can meet your sudden financial needs without exhausting your savings.  

What is a Loan Against PPF? 

PPF stands for Public Provident Fund. It is a government-backed investment scheme that offers tax-free returns along with other benefits. When you invest a particular amount in this program, you get the benefits of credit flexibility, eligibility, and wealth creation. The maturity date of a PPF account is 15 years.  

As an investor, you get access to partially withdraw the funds from your PPF account. But since there are lock-in periods on these accounts, you can’t withdraw during that time. However, borrowing against a PPF is still possible. In such a situation, the amount of the loan depends on the PPF account balance at the end of the last financial year. As these loans are secured in nature, the financing costs are lower than those of Personal loans. 

How Personal Loan and a Loan Against PPF Differ? 

Here are the major differences: 

1. Loan Amount: 

In a loan against PPF, the amount is restricted to the PPF account balance. Generally, this amount is not huge unless you get a handsome salary or have been working for a long time. Thus, a personal loan is a better option if you are looking for a loan for big-ticket expenses like marriage, foreign travel, higher education, and others. 

2. Financing Costs: 

Financing costs are also a major factor in differentiating a personal loan and a loan against PPF. The financing costs are comparatively lower in a loan against PPF vis-a-vis a Personal loan. 

3. Repayment Term: 

A longer repayment term would mean smaller EMIs. In a personal loan, you get various options of tenure, which makes the repayment easier. Contrary to this, in a loan against PPF, the repayment period is quite shorter. If you have borrowed a huge amount in a loan, the EMIs will be bigger, and it will be challenging for you to pay on time. 

4. Accessibility: 

As per your requirement and repayment capacity, you can apply for a personal loan multiple times in a year. On the other hand, you can borrow a loan against PPF only once a year. Thus, a personal loan should be a preferred option if you need money for various requirements or additional funds for the same expense. 

5. Process: 

The Personal loan is a straightforward process that you can complete even from the comfort of your home, i.e., through online channels. There will be a simple online form on a Fintech app, and you will get the funds directly into your bank account. Contrary to this, the PPF loan process is much complicated and time-consuming. In case of an emergency, you can’t rely on this option to get funds on time. 

Which option is better: A Personal Loan or a PPF Loan? 

By getting adequate information about both loan types, you must have understood that a Loan against PPF is good only when the loan amount is low, you don’t have an emergency for funds, and you are able to repay the loan within a short period.  

On the other hand, in case of emergencies, if you need a significant amount, then a Personal loan from Rupee112 would be a better funding option.