Personal Loan vs. PPF Loan – Don’t Choose Until You Read This

Financial emergencies can arise unexpectedly in everyone's life and leave the individual in urgent need of funds. The reason behind this can be anything ranging from a medical emergency to unavoidable house repair work or an unexpected purchase. All these situations are very challenging and can throw one’s finances off balance. In such a scenario, taking out a loan is undoubtedly the most viable option. It allows the person to get the financial aid he/she needs and handle that situation in an efficient manner.

Table of Content

• An Overview
• Personal Loan vs. PPF Loan

Currently, there are several different types of loans available that one can choose from. Among the various financing options, personal loans and PPF loans are definitely the most popular choices to take care of such situations. Both of these loans have their own unique features and benefits, which make them suitable for different situations.

Are you also in the process of obtaining a loan and unsure which one of these two is right for you? Read on to understand what personal loans and PPF loans are and how they are different from each other:

An Overview

A personal loan is a type of unsecured loan that is usually obtained to arrange a large sum of money in a short period of time. The loans can be availed for a variety of reasons, such as vehicle purchase, higher education, business expansion, etc. The lending institution offers complete flexibility in terms of fund usage, and the loan amount majorly depends on your creditworthiness.

A PPF loan, on the other hand, is a financing option that allows you to take out a loan against your Public Provident Fund (commonly known as PPF). This is a government-backed voluntary saving scheme that allows individuals to invest their money and get tax-free returns. If you’re a PPF account holder, you can borrow a certain percentage of your total PPF balance before the maturity date.

Personal Loan vs. PPF Loan 

Here is a detailed comparison of these two types of loans, depending on several factors:

Accessibility

Applying for a loan against your Public Provident Fund is an option only if you have an active Public Provident Fund account and have been maintaining it for at least 2 years. But personal loans, on the other hand, can be obtained by anyone with a steady source of income. If the applicant has a good credit history and the lending institution considers him/her capable of repaying the loan, the approval doesn’t take much time. In addition to this, the documentation is also less complicated for instant personal loanas compared to PPF loan.

Loan Amount

Personal loans give you a good amount of flexibility in terms of the amount you can borrow. Monthly income and credit score are two key determinants of a personal loan amount. Ranging from a few thousand to several lakhs, you can choose a loan amount as per your financial needs and repayment capacity. But PPF loans always come with a restriction for the same. You can only borrow a specific percentage of the total account balance. So, for situations where your fund requirement is higher, PPF loans can’t serve the purpose.

Rate of Interest

Given the immense popularity of this financing option, personal loans are available at highly competitive interest rates. In addition to this, most lending institutions also offer lower interest rates for borrowers with a good credit history. But PPF loans, on the other hand, have fixed interest rates (which are usually higher than personal loans). As a result, you’ll end up paying more money as loan interest if you opt for a PPF loan.

Repayment Tenure

Generally, PPF loans come with a standard tenure of 36 months (3 years), while personal loan tenures are a lot more flexible. Every lending institution offers a number of personal loan schemes with different credit tenures. Generally, the personal loan tenure ranges between 12-84 months, so you can make a choice as per your convenience. Whether you want to borrow money for a shorter period or need long-term finance, opting for a personal loan is definitely a better choice.

In order to ensure your financial well-being, it is important that you choose the right type of loan according to your financial situation and preferences. While both of these financial options come with their own set of advantages, personal loans are undoubtedly the most popular because of the convenience and flexibility they offer. 

Suggested Read: PPF, Public Provident Fund – Basics, PPF Account Opening, Interest Rate, Withdrawal & Tax Benefits

PPF Interest Rate: How to Calculate Returns, PPF Calculator, Tax Benefits

At Muthoot Finance, we offer quick and hassle-free personal loans at low interest rates. You can explore several instant personal loan schemes with different tenures and pick one that makes the right fit for you. To check your eligibility and calculate the EMI amount, you can use our online PL (Personal Loan) calculator. Or, you can also visit your nearest Muthoot Finance branch for more information.