Choosing between a Personal Loan and a loan against PPF can be confusing, as both may appear suitable. Each option depends on the borrower’s profile and financial needs. A loan against PPF is a secured option with lower interest rates; however, it is available only between the 3rd and 6th financial year of your PPF account and is limited to 25% of the balance at the end of the second year preceding the loan application. A Personal Loan is unsecured and offers quicker access to funds.
Understanding the key differences between these two options will help you choose the one that best suits your financial requirements.
What is a Personal Loan?
A Personal Loan is an unsecured loan, meaning you don’t have to provide collateral (such as property or gold jewellery).
Personal loans are disbursed quickly based on your financial credibility. Lenders review your bank statements, monthly income, credit score, and other financial information. If you qualify, you can avail a Personal Loan with minimal documentation.
Current interest rates in India (2025) range from 9.5% to 10.5% annually, depending on your credit score and lender.
A Personal Loan is a quick way to access instant liquidity, allowing individuals to borrow relatively smaller amounts with minimal hassle.
Read Also: Different Types Of Personal Loans In India
What is a Loan Against PPF?
PPF stands for Public Provident Fund, a government-backed retirement scheme launched in 1968. People deposit a percentage of their income into a PPF and earn interest on the amount saved. By retirement, they accumulate a substantial corpus for post-retirement use.
The maximum annual investment allowed in a PPF account is capped at ₹1.5 Lakh. Contributions are eligible for tax deduction under Section 80C of the Income Tax Act.
A loan against PPF is a loan taken against your PPF balance. It is available only between the 3rd and 6th financial year of the account. The maximum loan amount is restricted to 25% of the balance at the end of the second financial year preceding the loan application.
The PPF loan interest rate is 1% higher than the prevailing PPF interest rate. However, while the loan is active, you won’t earn interest on the portion of your PPF balance used as collateral.
Personal Loan vs Loan Against PPF: Key Differences
To help you understand which option suits your needs better, let’s compare the key differences between a Personal Loan and a loan against PPF.
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Personal Loan vs Loan Against PPF: Which Option Should You Choose?
Your financial priorities, urgency, and long-term objectives will help you choose the best option.
- If you don’t want to provide collateral and need quick access to funds with flexible repayment choices, a Personal Loan is a good solution.
- If you want a more affordable option and have an active PPF account within the eligible years, a loan against PPF is a cost-effective option.
Important disclaimer: A loan against PPF is not available at all times - it is restricted to the 3rd–6th financial year and capped at 25% of the eligible balance.
To Conclude
Both Personal Loans and loans against PPF have their own advantages and limitations. Personal Loans carry higher interest rates but require no collateral and are disbursed quickly. Loans against PPF are cheaper but limited in availability and amount.
If you’re looking for a loan with quick approval, minimal documentation, and competitive interest rates, explore Poonawalla Fincorp’s Personal Loan.
Read Also: 7 Smart Ways to Get a Personal Loan Without Income Proof in 2025
FAQs
Can a loan against PPF be taken multiple times?
Yes, but only within the 3rd–6th financial year window, subject to repayment of previous loans and available balance.
Does taking a loan against PPF affect tax benefits?
Tax benefits on PPF contributions under Section 80C remain intact. Loan repayment does not provide any additional tax deduction.
Is a Personal Loan suitable for long-term expenses?
Personal Loans are best for short- to medium-term expenses; long-term needs are better met with structured credit like home loans.
What happens if a loan against PPF is not repaid on time?
The outstanding amount is recovered from the PPF balance, and continued default may affect future withdrawals.
Can interest rates on Personal Loans change after approval?
Fixed-rate Personal Loans remain unchanged. Some lenders may offer floating-rate options depending on their policies.
We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply