A Public Provident Fund (PPF) account is one of the tax-friendly investment options for long-term savings. Investments in Public Provident Fund are considered as one of the safest and beneficial from a long-term investment perspective. The interest and maturity proceeds on these are exempt from tax. An investor can also enjoy tax deductions on PPF investment under Section 80C. PPF account also allows a loan to account holders depending on the account balance available.

PPF accounts can help account holders avail of a short-term loan at a 1% interest rate. Here are all the details you need to know on loan against PPF.

What is the significance of a loan against PPF?

PPF is a long-term investment scheme. Sometimes investors may require funds for financial needs. PPF allows partial withdrawals to account holders who require funds to cater to their needs. However, such withdrawals can be made only after the completion of at least six years of investment into the account. In case an investor needs funds before this period, he/she can make use of the loan facility against PPF.

What are the eligibility criteria for a loan against PPF?

A loan against PPF can be availed starting from the 3rd financial year up to the 6th year of the account opening. Suppose, if the account was opened in 2020-21, a loan can be availed starting from 2022-23. This is a short-term loan for 36 months and should be repaid by this period.

Important factors to note regarding loan against PPF

Timelines for PPF loan

A loan against PPF can be availed if an investor needs funds before the completion of six years of investment. One can get a loan against a PPF account from the third to the fifth year of account opening. The loan can be availed for a maximum of 25% of the PPF account balance maintained two years before the loan application was made. For instance, if a PPF account was opened in 2019-20 and a loan application is made in 2024-25, the account owner can avail 25% of the PPF account balance as of the year 2022-23. Additionally, if one repays this loan fully, they can avail of a second loan before the completion of the sixth year of PPF account opening.

The interest rate on PPF loan

PPF loan comes with an interest expense of 1%. Earlier the interest rate was 2%, however, it was lowered to 1% subsequently. Interest is calculated on the PPF Loan Amount for the duration starting from the first day of the month during which the loan is taken up to the last day of the month during which the loan is repaid. For instance, if an account owner has taken a loan against PPF on 20th June 2020 and repaid it on 12th October 2020, the loan interest rate of 1% is charged from 1st June 2020 to 31st October 2020.

Conditions to apply for a loan against PPF

The following points must be considered before applying for a loan against PPF:

PPF loan can be availed between the third and sixth financial year of account opening. After this period, the account holders can only make partial withdrawals from their PPF account.
The maximum amount that can be availed is 25% of the investments made at the end of the second financial year prior to the year in which the loan application was made.
Before applying for a second loan on a PPF account, the account holder must have cleared the first loan (applicable to those who plan to take more than one PPF loan).
The interest on the PPF loan is fixed at 2% more than the interest applicable to the account balance. Thus, any changes in the PPF interest rate impact the interest applicable on the loan against the PPF account.
Once the interest rate is set for the PPF loan, it cannot be changed within the duration of the loan.
In case the account holder does not make loan repayment within 36 months, the interest rate applicable will be 6% more than the interest earnings on the account.
If the borrower repays the principal amount under the loan tenure but does not repay the interest amount in part or fully, then the payable amount will be deducted from his/her Public Provident Fund account balance.
PPF loan borrowers must first repay the principal amount followed by the interest dues. Interest has to be paid in a maximum of two monthly instalments.


A low-interest rate is one of the main highlights of a loan against the PPF account balance. It provides an easy finance facility to account holders and without causing any additional interest burden. Since there is no collateral required against this loan, PPF account holders can easily opt for this facility. Repayment flexibility is another factor why many people opt for this loan facility.

FAQs How to take loan against PPF

  1. When can you take a loan against the PPF account?

PPF account holders are eligible to take a loan against PPF accounts between the third and sixth financial year from the account opening date. Post this, one can only partially withdraw the required amount from their PPF account.

  1. How much loan can be taken from a PPF account?

A PPF account owner can take a maximum 25% of the total investments as a loan. The percentage is applied on account balance as at the end of the second financial year preceding the year in which the loan has been applied for.

  1. How much interest is charged on the PPF account loan?

The interest chargeable on the PPF account loan is 2% more than the interest earnings on the balance in the PPF account.

  1. What is the PPF loan tenure?

PPF loan must be repaid within 36 months of borrowing. Post this, the interest rate on the borrowed amount rises from 2% to 6%.

  1. How can I repay the PPF loan?

Public Provident Fund loan principal amount must be repaid first and then the interest amount. This must be repaid within 36 months from the date of borrowing. The amount has to be paid in two monthly instalments or less.

  1. What happens if you forget to pay the PPF instalment?

If an account holder misses the minimum PPF account annual deposit requirement of Rs. 500, it can lead to account deactivation. To reactivate the account, one has to pay a penalty of Rs. 500 for each year of minimum PPF payment amount missed.

  1. Can I withdraw PPF after 5 years?

You can withdraw money from your PPF account at any time after the completion of 5 years. For this, you will have to approach the bank or post office where the account has been opened and submit Form-2.