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PPF Loan vs Personal Loan: Which Option Offers Better Benefits and Lower Risk This Diwali?

Siddhi Jain | October 12, 2025 5:15 PM CST

As the festive season brings extra expenses, many people look for quick financial support to manage their spending. This Diwali, if you are planning to take a loan, you may be wondering which option suits you better — a PPF-based loan or a personal loan. Both options can help in different situations, but they vary significantly in terms of eligibility, interest rate, risk, and repayment flexibility. Let’s understand their key differences to help you make an informed financial decision.

What Is a PPF Loan?

A PPF (Public Provident Fund) loan allows account holders to borrow money against the balance available in their PPF account. This is a secured loan, meaning your PPF savings act as collateral.
You can borrow up to 25% of your PPF balance after the completion of three years from the date of opening the account. The interest rate on this loan is usually 1–2% higher than the prevailing PPF interest rate, which is currently around 7.1% per annum.
Repayment must be completed within 36 months, and if you repay on time, your PPF account continues to earn interest on the remaining balance.

What Is a Personal Loan?

A personal loan is an unsecured loan, meaning it does not require any collateral. It is approved based on your credit score, income level, and repayment history.
Banks and financial institutions offer personal loans for a wide range of purposes such as weddings, travel, education, or medical expenses. The loan amount and interest rate depend on your financial profile and the lender’s terms.

Interest rates typically start from 9.99% per annum and can go much higher depending on the borrower’s creditworthiness. Repayment tenure is flexible, usually ranging from 12 to 60 months, and the funds are often disbursed quickly — sometimes within hours.

PPF Loan vs Personal Loan: A Detailed Comparison

Feature	PPF Loan	Personal Loan
Loan Amount	Up to 25% of PPF balance	Based on credit score and income
Interest Rate	1–2% higher than PPF rate (~7.1%)	Starts from 9.99% per annum
Collateral	Secured against PPF balance	Unsecured (no collateral)
Repayment Tenure	Up to 36 months	12 to 60 months
Loan Frequency	Once per financial year	Multiple times, subject to creditworthiness
Impact on PPF Balance	No impact if repaid on time	None
Usage Restrictions	Limited by PPF balance	No restrictions
Processing Time	Slower, more formal process	Fast and often online

Risks and Limitations of Personal Loans

While personal loans provide easy access to funds, they also come with a few potential downsides:

Higher Interest Costs:
Compared to secured loans, personal loans have higher interest rates, increasing the total repayment amount.
Credit Score Impact:
Missing EMI payments or delaying repayments can negatively affect your credit score, making future borrowing more difficult.
Debt Burden:
Taking multiple personal loans can lead to a heavy repayment load, which can affect your overall financial health.
Emotional Stress:
Constant debt pressure may lead to financial anxiety and emotional stress, especially if not managed carefully.

Which Loan Should You Choose?

Choose a PPF Loan if:
You already have a PPF account with sufficient balance, need a smaller amount, and prefer a lower interest rate with minimal risk. It’s ideal for short-term or moderate financial needs.
Choose a Personal Loan if:
You need a larger amount, don’t have a PPF account, or require immediate funds for urgent needs. Personal loans provide greater flexibility but come at a higher cost.

Final Verdict

Both PPF-based loans and personal loans serve different purposes. A PPF loan is cost-effective, safer, and ideal for smaller, short-term needs, while a personal loan offers flexibility and larger funding options for big expenses.
Before making a choice, evaluate your financial stability, repayment capacity, and urgency of funds. Choosing wisely can help you enjoy your Diwali celebrations without financial stress.