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There is no better option than Public Provident Fund Scheme if you want to raise huge funds by investing regularly for 15 years. PPF is currently giving 7.1% annual interest. But PPF is a long commitment. Its 15-year long lock-in period is challenging . In its tenure of 15 years, many avenues are open. Investors can withdraw money apart from raising loan on PPF balance.

When can you raise loan against PPF?
A loan against PPF can be taken from the third financial year of opening of the account. From the third financial year to the end of the sixth financial year, you will be able to take a loan from PPF. For example, if you have opened PPF account in July 2019. So 2019-20 would be the first financial year, then 2020-21 would be  the second financial year. The third financial year would be 2021-22. So from the third financial year i.e. from 1st April 2021 to the end of the sixth financial year 2024-25 i.e. till 31st March 2025, you can raise a loan against your PPF balance.

How much loan can you raise?
The loan amount can be up to 25 percent of the total amount deposited in the account. When taking a loan against PPF, the principal amount has to be repaid first and interest is paid later on. The principal can be repaid in installments but this loan has to be repaid within 36 months i.e. 3 years from the date of commencement of the loan tenure.

Calculation of interest
The loan will be available at 1% higher interest than that applicable on PPF. Right now you are getting 7.1% interest on PPF. In this case, you will get loan  @  8.1%. The interest rates on PPF is revised on a quarterly basis, but the interest rate of the loan will remain the same till the loan is repaid. The interest has to be paid in two monthly installments or in lump sum. If you do not repay the loan within the stipulated time, then the remaining loan amount will be deducted from the PPF account. Also, 6 percent higher interest may have to be paid on the outstanding loan amount.

This 6% interest rate will be applicable from the first day of the next month of the commencement of the loan. It will be applicable till the payment of the last  installment. That is, the interest rate will be higher by 1% initially. But,  if the loan is not repaid within 36 months, it will become 6%.  If the investor dies, his nominee or legal heir will have to repay the interest on the loan.

PPF loan better than personal loan
A personal loan appears to be an easy option in case of  sudden need for money. It is also available without any collateral but very high interest is charged on it. In such a situation, an investment like PPF will prove to be helpful for you.