Which Is Preferable: EPF Advance Or A Personal Loan.

During a financial crisis, all you want is quick money help. Since jobs are hard to find during the pandemic, money has become more important. But both banks and the government have come up with programs and other ways to help you in these situations. Today, we’ll compare an EPF account to a personal loan and discuss which one is better in different situations.

How does EPF Advance work?

EPF advances are money that EPF members can get in a financial emergency, like a medical problem, expensive school bills, a wedding, etc.

Due to the ongoing pandemic, the Indian government has made it easier to get money out of the EPFO account. This was done to help people who have lost their jobs and have trouble making ends meet.

According to the new rules, you can only take out whichever of theștiind amounts is less:

You can withdraw up to 75% of the total amount in your PF account.
The amount is the same as your salary for three months. In this case, “salary” means the basic salary plus the “dearness allowance.”
But when you take money out of your EPF account, it changes the amount of money you are saving for retirement.

Rules for Getting an EPF Advance

The EPFO says that if you want an EPF advance, you must meet the following requirements:

People who have served for at least 60 months can get money out of their accounts to buy land. When it comes to land, you can only take out 24 times your basic monthly salary, including any dearness allowances. However, in the case of a house, you can take out up to 36 times your basic salary plus Dearness Allowance. In both cases, the most you can spend is limited to the total price.

People who have served for at least 84 months can take money out to pay for things like a wedding or school. The employee’s EPF contribution is equal to 50% of the maximum EPF personal loan limit.

To get an EPF loan, a person must be at least 54 years old and take money out a year before retirement. The most you can take out is 90 percent of the total amount you have savedștiith interest.

All you need to get an EPF loan in case of a medical emergency is nothing. You can take out the lesser of six times your basic monthly salary or the total employee contribution, including interest.

How EPF Loans Work

If you have an EPFO account and want to make money, you can do so online or in person. You can get the composite claim form from the UAN portal and fill out the Aadhar/Non-Aadhaar form for the offline process. On the other hand, the online request can be made entirely on the UAN website/portal.

What is an unsecured loan?

Personal loans don’t have to be paid back right away. They can be used for several good reasons. You don’t have to explain why you need the money, and you can use it whenever and wherever you want. People often take out this loan for medical emergencies, home improvement, a child’s education, or a wedding.

The rules for getting a personal loan are:

To get a personal loan, you must meet the following requirements:
You have to be between 21 and 58 years old and be an Indian citizen.
You must make at least Rs 15,000 per month and show proof of your income with a salary slip, salary certificate, bank account statement, and ITR document.
Personal loans are unsecured loans, so people who want to borrow money must have good credit.
To be eligible for a personal loan, you can’t miss any payments on your other loans.

Personal Loans: How They Work

The most you can borrow with a personal loan is Rs 5 lakh.
As a borrower, you can choose a flexible repayment plan that lasts anywhere from 12 to 60 months.
If you want to get rid of the loan and save a lot of money on interest, you can do so after the first 12 months of EMI payments have been made. You do have to pay a small foreclosure fee, though. The fee is based on how much money is still owed.

How to Apply for a Personal Loan

Most places where people want to borrow money let them do so either online or in person.

The online method

Visit the website of the lending company you want to work with.
Go to the part about personal loans.
Fill out the form online and upload some simple documents.
Send in your request.
After your information has been looked over and found correct, the loan will be approved soon.

 

Getting a personal loan in person and online are almost the same. At the lender’s branch, you have to go through the same steps as you do online.

Which is Better: an EPF or a personal loan?

Personal loans are better than EPF advances in many ways. If you take money out of your EPF account, you risk your retirement savings. Since the money taken out of the EPF can’t be put back in, this could hurt the country in the long run. But with a personal loan, you can use the money however you want, pay it back whenever you want, and more. Also, both the terms and conditions and the application process are pretty easy to understand. It doesn’t have as many rules as EPF advance.

To wrap up

Personal loans have a slight edge over EPF advances because they are easier to get and have less strict rules about who can get them. But if you are a first-time borrower and don’t have a credit history, an EPF loan can help.