Many a time we come across such people who are ready to use up their savings for fighting with an emergency but don’t prefer a loan. Everyone does saving with a particular vision in their mind, such as children’s education, purchasing a home or car, children’s marriage, retirement or anything else. But still, in the time of emergency, they are willing to use up savings which were kept for those unavoidable expenses. Availing a loan instead of using the savings of your entire life is always advisable, as your savings still remain safe. Taking a loan has become very handy nowadays. Even there are various kinds of loans available in the market, among which you can choose the one which best suits your needs.
For meeting up cash crunch in emergencies, an online personal loan and a loan against PPF both work well. Both types of loans can be used for any purpose of one’s wish. Though it is true that personal loan and a loan against PPF both loans can be used in pursuing any of your need but there are some differences as well. So when you are to go for a loan, let us understand the difference between Loan against PPF and Online Personal Loans with the clear picture as drawn below.
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 three years. So a shorter tenure means you are to pay a higher EMI. A higher EMI can obviously become a burden on any borrower.
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 than 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 ₹ 1,000,000.
Borrow only Once in a Financial Year:- 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, then also a second loan on PPF in the same financial year is not allowed. But a personal loan online is exceptional. Personal loans can be availed multiple times within a year provided your lender is ready to lend you.
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 within 3 years then the interest rate jumps to 6% more than the current rate offered on PPF balance. The interest rate is a little bit higher in personal loan. But if you have a good credit score, there is a scope of negotiation on the interest rate which is never possible if you are taking a loan against a PPF.
Loan against PPF can be applied after completion of third Financial Year– A loan on a PPF can be applied within the third to the sixth year of opening the account. For an example, you have opened the account in November 2011. Then you can avail loan from the FY 2014-15 to FY 2016-17 i.e. up to 31st March 2017. As from the financial year 2017-18 onward, your account will be eligible for withdrawal only. But there are no such limitations in case of personal loans.
Your Savings are at Risk:- When you take a Loan against PPF your savings of entire life is at a risk. In the case of failure of repayment, the bank will have the authority to deduct the loan amount from your PPF account. So there is some risk factor in such situations. But loans online are collateral free loans. So there is no less risk factor for the borrower, the only damage being declared a NPA in case of defaulting for more than 90 days.
The Second Loan against PPF can be Taken only after 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 repaying the first loan. Personal loans are exceptional in this regard. A person can have multiple personal loans at the same time.
Processing Time:- If you are in an urgent need of cash then an online personal loan will help you the best. The processing time of a personal loan is much faster than a loan against PPF. You can apply for a personal loan online and the loan amount is supposed to be in your bank account within 24 hours.
So, here are the main differences between a personal loan and a loan against PPF. If your PPF loan amount can be enough for your need and you can repay it within 36 months then you can go with a loan against PPF as the interest rate is low here. But if your need is an urgent one than an online loan is the best option for any borrower. So the selection between a loan against a loan against PPF and a personal loan depends completely on your financial situations and your requirements.