Confused between EPF Advance and Personal Loan? Although both offer several benefits, it becomes mandatory to choose the one that perfectly caters to your borrowing needs. Go through this guide to explore the differences and advantages of each option and make the best financial decisions.
What is an EPF Personal Loan?
Employee Provident Fund (EPF) is a retirement savings scheme
where a portion of an employee's salary is contributed to an EPF
account. An EPF Personal Loan allows individuals to borrow against
their EPF savings.
With an EPF Personal Loan, individuals can
access a portion of their accumulated EPF balance as a loan to meet
any immediate financial needs. The loan amount is typically
determined based on the available EPF balance and the loan repayment
is deducted from the EPF contributions made by the employee.
Eligibility Criteria for Taking Out EPF Advance
The eligibility criteria for taking out an EPF advance vary depending on the specific rules and regulations set by the country's EPF authority. Generally, there are certain common requirements to be eligible for an EPF advance. These may include:
- Active EPF account with sufficient balance.
- Meeting the minimum service period requirement.
- Specific purpose for the EPF advance (e.g., education, medical expenses, home purchase, marriage).
- Compliance with country-specific eligibility conditions (e.g., years of service, age).
- Adherence to the guidelines and regulations set by the respective EPF authority.
Step-by-Step Process to Apply for EPF Advance
Applying for an EPF advance involves the following process:
- Determine Eligibility
Check if you meet the eligibility criteria set by the EPF authority, such as minimum service period and purpose.
- Collect Required Documents
Gather necessary documents, including identification proof, EPF account details, and supporting documents for the specific purpose of the advance.
- Fill Out the Application Form
Obtain the EPF advance application form from the EPF office or website and complete it accurately with the required information.
- Submit the Application
Submit the filled application form along with the supporting documents to the EPF office through the designated channels, such as online submission or in-person submission.
- Await Approval
The EPF authority will review your application and notify you of
the approval status. If approved, the advance amount will be disbursed
to your designated account.
It is important to follow the specific
guidelines and procedures outlined by the EPF authority to ensure a
smooth application process.
What is a Personal Loan?
A Personal Loan is a loan provided by financial institutions like Non-Banking Financial Companies (NBFCs) for personal use. It is usually unsecured, which means it does not require collateral. People use the Personal Loan amount for various purposes, like medical emergencies, higher education, travel, or home renovation. The loan amount, interest rate, and repayment terms depend on factors like your creditworthiness and income.
Eligibility Criteria for Taking Out Personal Loan
The eligibility criteria for a Personal Loan usually include the following:
- Age
The minimum age requirement to be eligible for a Personal Loan varies between lenders. Some financial institutions like Poonawalla Fincorp have a minimum age criterion of 22 years and a maximum of 57 years.
- Income
Lenders assess an individual's income to ensure they can repay the loan. A stable source of income is usually required.
- Credit History
A good CIBIL score improves the chances of loan approval. Lenders review credit reports to evaluate an applicant's creditworthiness and repayment history.
- Employment Status
Salaried individuals with a steady income are usually preferred by lenders.
- Debt-to-Income Ratio
Lenders consider the borrower's existing debts and financial
obligations to determine their ability to manage additional loan
payments.
Meeting these eligibility criteria increases your
likelihood of obtaining a Personal Loan.
ALSO READ :- Top Advantages of Applying Online for a Personal Loan
What is the Personal Loan Application Process?
The step-by-step process to apply for a Personal Loan typically involves the following:
- Research and Compare Lenders
Begin by researching different lenders and their loan offerings. Compare interest rates, terms, fees, and eligibility criteria to find the most suitable option.
- Check Eligibility
Review the eligibility criteria for personal loan set by the chosen lender to determine if you meet the requirements regarding age, income, credit score, and employment status.
- Gather Required Documents
Prepare the necessary documents, such as identification proof, income proof, bank statements, and address proof.
- Submit The Application
Complete the application form provided by the lender, either online or in person. Fill in accurate information and attach the required documents.
- Await Approval
The lender will review your application and documents. This process may take a few days to weeks, depending on the lender's turnaround time.
- Loan Approval and Disbursal
If your application is approved, the lender will provide a loan
offer. Always review the loan terms and conditions carefully before
acceptance. Once accepted, the loan amount will be disbursed to your
bank account.
It's essential to understand the terms and
conditions, personal loan
interest rates, repayment options, and any associated fees
before finalising the loan agreement.
EPF Advance Vs Personal Loan – Which is the Better Option?
The following table gives a comparison of EPF Advance vs Personal Loan:
| Criteria | EPF Advance |
Personal Loan |
| Source of Funds | Withdrawal from EPF account. | Borrowed from a lender. |
| Eligibility Criteria |
Must be an EPF member and meet specific EPF guidelines. | Varies by lender, typically based on income, credit score, employment status, and age. |
| Loan Amount |
Limited to a specific percentage of EPF balance. | Varies based on the lender and borrower's eligibility. |
| Interest Rate | Lower interest rate set by EPF. | Varies by lender and borrower's creditworthiness. |
| Repayment Terms |
Repaid through automatic salary deductions. | Monthly instalments over a specified loan term. |
|
Processing Time | Generally faster processing time. | Processing time depends on the lender's procedures. |
|
Flexibility | Limited flexibility in terms of loan amount and repayment options. |
Flexible loan amount and repayment options depending on the lender's offerings. |
| Purpose |
Primarily for specific purposes like housing, education, and medical expenses. |
Can be used for various purposes as per borrower's discretion. |
| Credit Check |
No credit check is required. |
Credit checks are typically required by lenders. |
| Availability |
Limited availability based on EPF rules and eligibility. | Wider availability based on lender's policies and eligibility. |
To Conclude
Whether you are considering an EPF Advance or a Personal Loan, understanding their features will help you make an informed decision for your financial needs. Choosing between these two options depends on your individual needs, eligibility, and preferences. However, when applying for any type of loan consider contacting a trustworthy lender like Poonawalla Fincorp.
Frequently Asked Questions About EPF Loan & Personal Loan
1. Is EPF Advance Better than a Personal
Loan?
Deciding between an EPF advance and a Personal
Loan relies on your financial situation and the reason for needing
the loan. If you have an active EPF account and seek a
lower-interest-rate loan, an EPF advance might be more suitable. On
the other hand, if you lack an active EPF account or require a
higher loan amount, a Personal Loan could be a better choice.
2. What are the conditions for taking out EPF
advance or the loan against EPF?
The conditions
for taking out EPF advance are that you can use these funds for
purposes like construction of a house, repayment of current
mortgage, high school education expenses, wedding expenses, etc.
3. What are the circumstances that would allow an
employee to withdraw their EPF balance?
The
circumstances that would allow an employee to withdraw their EPF
balance include resignation, retirement, medical emergency,
unemployment, etc.
4. What is a Short-term Personal Loan?
A Short Term Personal
Loan is a kind of Personal Loan that is granted for a brief
period, usually ranging from one month to a year. These loans are
helpful for individuals who may face difficulties securing longer-term
loans due to various reasons, such as a low credit score or not
meeting the lender’s eligibility criteria.
5. What are the conditions for taking out a
short-term Personal Loan?
To take out a
Short-term Personal Loan, you have to be 25 years old, and your
credit score must be 750 or above. You should also have a minimum
monthly income as specified by the lender.
