With the influx of Pinterest and Instagram penetrating our life, it is easy to give in to the temptation of giving a complete makeover to our homes. However, if a shortage of funds is stopping you from unravelling your inner interior decorator, then there are various kinds of credit options at our disposal nowadays. Though one could take a home loan by calling ICICI home loan customer Care Number or LIC Home Loan Customer Care Number, for now, we will discuss the loan against PPF and personal loan for home renovation.
Loan against PPF: Should you?
Most of us have always associated PPF with wealth creation as it offers guaranteed tax-free returns. It is especially considered to be a favourite among tax savers due to the tax benefits it comes with. One enjoys the exempt-exempt-exempt (EEE) benefit; that is, the money is exempt from taxes at the time of investment, accumulation, and even withdrawal. The lower interest on loans against PPF does look tempting and appealing, but there is a catch that one should be aware of beforehand:
- If one opts for a loan against PPF, one must remember that the account won’t earn any interest during the loan period until the time the loan amount (principal plus interest) is repaid. This, therefore, impacts the tax-free returns of the account holder.
- The interest rate charged on a loan against PPF is at the rate of 1% per annum, but by opting so, one also loses out on the tax-exempted interest amount that one earns on their PPF. The individual will continue to earn interest on their balance amount, but no interest is paid on the amount of loan taken till the time it is repaid. This makes the effective interest rate charged on loans against PPF at the rate of the prevailing PPF interest rate plus the 1%. Hence, one can consider a home construction loan or home loan and call ICICI home loan customer Care Number from different banks if one doesn’t want their PPF amount to get affected.
- Another reason why taking a loan against PPF is a hassle is because of the scheme, which defines the eligibility by explaining who can take the loan against PPF. As per that, one can take a loan after the expiry of one year from the end of the year in which the account was opened but before the expiry of 5 years (from the end of the year in which you opened the account). Moreover, the amount of a loan that one can avail of cannot exceed 25% of the amount that was available in the account at the end of the 2nd year preceding the year in which you applied for the loan. This can be explained through an example. Suppose your PPF account was opened in 2020-2021. Through that, the loan facility will start from the third year from 2022-to 2023 and will continue from 2025-to 26 after opening the PPF account. Since a PPF account holder can only take a loan only between the third and the 6th financial year, it is better to choose ICICI home loan customer Care Number over that.
One must know that a loan on a PPF account can only be availed for a relatively smaller amount and only for a short duration. Choosing a home construction loan and choosing to call ICICI home loan customer Care Number is a far better option as this allows you to borrow for larger amounts and a longer period.
Is a Personal loan a good option for those looking to redo their house?
A personal loan for the home renovation will be available quickly to you as compared to other types of loans. It is provided you fulfil the eligibility conditions such as high credit score, stable income, etc. However, before taking a personal loan for this purpose, remember the interest rate on this loan is higher considering it is unsecured. Based on your credit history, it could range between 10-20 % pa. While interest on a loan against PPF is charged at 1 percent but one won’t be earning any interest till the loan is repaid. It is better to choose a loan against PPF when you require a small amount for a short period. When the project requires a substantial amount and tenure, it is better to call LIC Home Loan Customer Care Number.
How could a house renovation loan help you here?
When you require a higher amount and long tenure, Home Renovation or choosing to call ICICI home loan customer Care Number could be your saviour. Here is a look at how:
Low-interest rates: The interest rate on a Home Renovation Loan is somewhat equal to the home loan. You can either choose LIC Home Loan Customer Care Number or choose to go with the house renovation loan as it is secured against your home ownership.
Tax benefit: A house renovation loan fetches you a tax benefit on the interest rate. You can avail a tax deduction of up to Rs. 30,000 per annum for the interest that you pay on this loan. The same benefit is not available in other types of loans we have mentioned above, such as personal loans and loans against PPF.
Minimal processing: Availaing house renovation loan involves relatively simple documentation when compared to other types of loans. To get this, all you need is basic documentation like identity, income proof, photographs, property title, etc.
So we are saying,
PPF comes with the advantage of compounding returns. Taking a loan for house construction against PPF will impact the compounding of tax-free interest received negatively and also on your corpus as well. The loan from the PPF account should be treated as a last resort once one has exhausted all the available options of loans. A personal loan doesn’t have any restriction on the end usage of the loan as a loan against PPF would have. You can use a personal loan to either remodel your kitchen or save up a few rupees for future redoing the decor. Unlike PPF, you can straight away clear the eligibility to apply for the loan. But since the interest on a personal loan is on the higher end, choose to call LIC Home Loan Customer Care Number or ICICI home loan customer Care Number.