Personal Loan vs Loan Against PPF: Which is Better?
5 min read | 5 months ago
Should You Pick A Personal Loan Or A Loan Against PPF?
In modern times, financial stability is an essential element of livelihoods. However, emergencies can come at any time. Consider instances like when we want to buy a house or car or pay for our child’s education. We often find ourselves needing financial assistance in these situations. Personal loans and PPF Loans are the two main choices of individuals who have their own financial needs. Personal loan banks grant quick cash without any usage restrictions, while loans against PPF have reduced interest rates and longer repayment plans.
Nevertheless, both alternatives do entail some advantages as well as disadvantages. Understanding these differences enables people to identify the most appropriate option for their respective circumstances. In this blog, we will take a more detailed look at Personal Loans and Loans against Public Provident Funds, with their features, benefits, and disadvantages.
Comparison Of Personal Loans And Loans Against PPF
Here is an assessment of the differences between personal loans and loans against PPF.
| Personal Loan | Loan Against PPF |
|---|---|
| Banks offer Personal Loans based on your income and repayment capacity. Other factors like Credit Score and debt-to-income ratio also influence personal loan approval. | A Loan Against PPF is restricted to your PPF Account balance. Therefore, if you require a larger loan amount, you will not be able to request the bank to sanction a higher amount of loan. |
| Personal Loans can be unsecured loans. Therefore, banks typically charge an interest rate as per your risk rating, which can go higher if you fall short of the bank’s eligibility criteria. | Loans Against PPF have a lower interest rate as PPFs are government-backed investment schemes with guaranteed returns. |
| Repayment tenures on personal loans can go as high as 84 months. | Repayment tenures on loans against PPFs are generally lesser than personal loans. |
| Borrowers can apply for a personal loan at any time. | PPFs have a lock-in period. Therefore, borrowers cannot apply for a loan against a PPF unless the lock-in period is over. |
| Personal Loans have a streamlined application process. Therefore, approval times are generally low. | Loans against PPFs are complex, and it takes the bank longer to process the loan request. |
| There are no restrictions on how many Personal Loans you can apply for. | You can apply for a loan against a PPF only once a year. |
Factors To Consider When Choosing Between The Two Options
When it comes to getting a loan, there are actually many choices to select from. Two common ones are personal loans and loans against PPF (Public Provident Fund). Both have their own set of advantages and disadvantages. Therefore, picking the right one is a matter of carefully considering a few factors.
- Interest rates: The interest rate of a personal loan is typically higher than the loan against PPF. In fact, if you are looking for a lower interest rate, a loan against PPF is a better choice for you.
- Loan amount: A personal loan amount is usually higher than a loan against PPF. Consequently, if you are hoping to borrow a larger amount, a personal loan will fit your plan much better.
- Repayment terms: The repayment plan of a personal loan is typically more flexible than a loan against PPF. Consequently, if you want additional consideration in terms of repayment, a personal loan could be the way to go.
- Credit score: Your credit score is of prime importance when you apply for a personal loan. If your credit rating is low, you may find it hard to get a personal loan.
- Approval times: Personal Loans are generally approved within 15 days. However, loans against PPFs take a much longer time to get approved. Therefore, if you are looking for urgent financing, personal loans are a better option for you.
Conclusion
Both personal loans and loans against PPFs have their own set of advantages and disadvantages. Personal loans are unsecured, quick to obtain, and can be used for any purpose. On the other hand, loans against PPFs are secured, have lower interest rates, and can be used for specific purposes. However, loans against PPFs may also have limitations on withdrawal amounts and tenures. Ultimately, the choice between the two depends on your financial needs and goals. Consider your repayment capacity, interest rates, and the purpose of the loan before making a decision.
FAQs
1. Should I opt for a personal loan or a loan against PPF for a quick loan?
If you are short on time, a personal loan could be a better option for you. However, if you want assured approval, a loan against PPF would be a better choice.
2. Will I still earn interest on my PPF if I take out a loan against it?
Once you take out a loan against PPF, you will not earn interest on it until you repay it.
About Unity Small Finance Bank
Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.
