The Public Provident Fund (PPF), long considered one of the most secure and tax-havenish avenues for saving in India, provides reasonable returns on long-term compounding coupled with tax exemptions under Section 80C. However, one lesser-known fact about PPF accounts is being be used to take a loan against PPF account.
For people looking for short-term liquidity, especially to make investments or pay for urgent expenses like down payments on property, loans against PPF can serve as a handy tool. Nevertheless, it comes with some restrictions, limitations, and alternatives that warrant serious consideration.
In this blog, we will cover everything you need to know about loans against PFF accounts, like eligibility, interest rates, limits, and the advantages or disadvantages compared to partial withdrawal and other financing options.
Table of Contents
What is a Loan Against PPF?
PPF loans are those loans that can be taken against the PPF accounts by account holders without breaking the PPF accounts or closing them. That means PPF accounts can be taken out by a loan against the PPF corpus of the account holders at a fairly low interest rate.
This is specifically useful for short-term and emergency requirements of funds without touching the long-term investments or high-interest loans.
PPF Loan Eligibility Criteria
Eligibility for availing a loan against PPF:
- One cannot loan his money till the third year or beyond the 6 th year of opening the PPF account.
- This PPF account should not be opened out of an outstanding loan.
- The account must be active and have no discontinuities.
So, essentially, eligibility for a PPF loan can be accessed only within a specific window during the account’s tenure.
See also: Home Loan Sanction Letter: Format, Validity & Key Things to Know
How Much Loan Against PPF Can You Get?
One of the frequently asked questions is:
What is the amount of loan against a PPF that we are allowed to avail?”
As specified in the PPF rules:
The second factor is the withdrawal amount you are allowed to take out of your PPF account by the end of the second financial year, before applying for the loan is 25 percent of the closing balance.
For instance, if you take a loan in FY 2025-26, the loan amount would be 25% of the closing balance in FY 2023-24.
So, if your balance in 2023-24 were ₹2,00,000, you could expect a loan of up to ₹50,000 in 2025-26.
Loan Against PPF Interest Rate (2025)
The latest update says:
- The loans being availed against PPF will be charged interest of 1 percent more than the interest rate of PPF at the time.
- The PPF interest rate up to July 2025 is at 7.1% p.a. In this way, the rate of interest on loans becomes 8.1%.
It is much lower than most unsecured personal loans and thus a very economical source of short-term borrowing.
See also: APF Full Form in Banking & Home Loan | Check APF Number
Loan Against PPF vs Partial Withdrawal: What’s Better?
Partial withdrawal option is made available from the 7th Financial Year and so what’s the difference?
| Criteria | Loan Against PPF | Partial Withdrawal |
| Available from | 3rd to 6th financial year | 7th year onwards |
| Amount limit | 25% of balance (preceding 2nd year) | 50% of balance (preceding 3rd year or 6th year) |
| Repayment | Mandatory | Not required |
| Interest applicable | Yes (1% above PPF rate) | No interest charged |
| Impact on future contributions | None | None |
If both options are available, a partial withdrawal can be better since there is no interest burden. However, a PPF loan is good in case cash is needed early on (before the 7th year).
Loan Against PPF for Home Buying: Is It Practical?
This is, after all, the question most first-time buyers dread:
“Can I use PPF Loan to buy Property?”
“Is it worth getting a Loan against PPF for buying a property?”
Well, technically yes—you could borrow money from the loan amount for anything personal use like buying a house, giving a little initial deposit, or covering registration costs. But:
- The limitation is that the figure would be relatively lesser (up to 25 percent of the balance).
- It is suitable for small-ticket needs, not full-scale financing.
For instance, if you have 6 lakh rupees parked in your PPF, you will get only 1.5 lakh rupees as a loan, which surely cannot be used to buy a house independently.
That means although it works, it isn’t a substitute for a home loan, nor can it be the primary funding provider.
See also: First Time Home buyer Loan Benefits, Tips and Advice
Can I Get a Loan Against a PPF Account After 15 Years?
This is a very important point and is something which many ask about, whether or not they can avail of a loan against PPF after 15 years.
The short answer is no.
- The loan facility will lapse immediately at the end of the 6th financial year.
- Upon maturity, it is possible to take out money or renew the account in 5-year blocks.
- Even during extension (with contributions), a loan facility is not permitted.
Therefore, the borrowers need to know the repayment plan before availing the loan.
Limitations of a Loan Against a PPF Account
A loan against PPF attracts lower interest and does not need collateral, but there are limitations:
- Time Restriction – The loan can be taken only after the end of 3 years and before the end of 6 years.
- Loan Limit – It is not more than 25 per cent of the balance accepted to the credit of the PPF at the end of two years.
- No Loan after 6th Year – After the completion of 6 years, that is, when you become eligible for partial withdrawal, no loans are granted.
Non-Renewable – You may take a second loan only after complete repayment of the first one.
Loans Cannot Be Used for Business or Trade: As per P.P.F. rules, the money cannot be put to speculative use or business.
Repayment Terms for PPF Loans
- The principal must be repaid 36 months from the date of disbursement.
- Interest is not compounded, and payments are made in two installments, a month after principal repayment.
- If not paid on time, the loan interest will rise to 6% above the PPF rate.
See also: Complete Guide to Stamp Duty and Registration Charges in Gurgaon (2025)
Alternatives to Loan Against PPF for Real Estate Buyers
If you’re considering gearing up to invest in property and need some funding, here are a few better alternatives for you:
Home Loans
- Offers funds at a very high level
- Offers a long repayment period (up to 30 years)
- Tax benefits are given to both the principal and the interest.
Loan Against Property (LAP)
- Secured loan mortgaged by property, either residential or commercial.
- The interest rate is lower than personal loans
Personal Loans
- Unsecured but fast available
- Cheaper rates than PPF loans
Mutual Fund Loan / SIP Loan
- You can pledge your equity shares to get a loan if you are holding them.
Provident Fund (EPF) Advance
- Different from PPF but mostly more generous as well as flexible regarding usage
These loans, such as loans against PPF, are cheaper and convenient, but all other alternatives offer larger loan values and much longer repayment periods, which themselves are very much suited in the case of real estate requirements.
In Short:
The first few years of the PPF account provide an opportunity for the loan against PPF facility to meet immediate liquidity requirements simply and securely in a secure and tax-efficient manner. Clearly defined limitations restrict the tenure and amount available for such borrowing for all big-ticket purchases, such as home buying.
Is it possible to take out a loan against a PPF account?
Yes, but only within a narrow eligibility window and with very strict conditions.
The suggestion we would give lies in considering cautiously prior to acting:
Starting date of the PPF account,
The loan amount you wish to borrow,
And whether any other source of financing would be more appropriate for your case.
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