Are you in need of money and wondering whether to apply for the personal loan or go for the loan against PPF. Here is some information which will help you make a better decision.
It is your own money
When you are taking the loan against the provident fund, you are asking for your own money. This means that you are not taking the money from anyone else or any bank. Although you have to pay the money back but the payback laws are not as stringent as in the case of personal loans through a bank. Since it is your own money, there is a lot of flexibility offered during repayment. This is the reason why taking loan against provident fund is much better than taking a personal loan.
Interest rates are usually lower
When you are taking the loan against the provident fund, you may get much lower interest rates as compared to personal loans. There are many reasons for this. The first reason is that you are not asking for the money from anyone else. You are asking the money from the government which has been held to be paid out to you later either at the time of your retirement or at the time of leaving your current job. Since it is your own money therefore the interest rates are quite relaxed. While the interest rates for personal loans could go as high as 20 percent per year, provident fund interest rates are usually 10-12 percent only.
PPF loans are easier to get
Loan against provident fund is much easier to get than the personal loans. Provident fund money is something that you have already earned and it is yours. Although it is held by the government to be paid out to you after a certain time, you can still apply for the loan. Since it is your own money, therefore, there are no strict credit checks as there are with personal loans. When you are applying for a personal loan you have to go through several stages of verification. This is because the banks want to make sure that their money is safe and they want the assurance that you will be able to pay it back. When you take the loan against PF no such verifications are required as you have already earned that money.
Untimely payment or Non-repayment does not affect the CIBIL scores easily
When you take the personal loan from a bank they want it back in every possible way. This is the reason why they have a huge collection department which can get tough on you sometimes. But the biggest problem with personal loans is that if you are not able to repay them on time it starts impacting your credit score with CIBIL. Although they give you some amount of time before reporting to CIBIL, the time given is much less. On the other hand, if you have taken the loan against PPF it is your own money. If you are not able to pay back on time, your credit score does not get impacted.