Employee Provident Fund or EPF is a retirement benefits scheme. The Indian government has approved this scheme for salaried employees and under this scheme, employees from eligible organizations contribute a small sum of money from their monthly basic pay in their PF(Provident Fund) accounts.
Employees can withdraw some money from their PF accounts and use it as a personal loan. But it is not like the typical personal loan where the person has to repay the amount to the bank, the loan is non-refundable.
The Employer’s Provident Fund Organization or EPFO oversees this procedure and lets an employee to withdraw money after verifying the reason. A person who has worked in a company for more than 5 years becomes eligible for a loan from his/her PF account.
Let's know the need for EPF Loan, interest rate, and steps to apply for the same.
EPF Loan Eligibility
Here are a few common reasons for which the company allows to take EPF Loan:
Marriage: An EPF advance can be provided for your own marriage or for your son’s and daughter’s marriage.
Education: Education is one of the key reasons for PF withdrawal. It can be for the education of your daughter, son, brother or sister.
Purchase of home or plot: You can withdraw the EPF amount when you wish to purchase a home or plot.
Medical treatment: You are eligible for the EPF loan if your spouse, daughter, son, father or mother needs medical treatment in case of serious illness.
Home loan payment: People also take EPF loan to pay their home loans.
Calamity: Incase of any natural calamity, you can withdraw money from PF account to recover from huge losses.
Addition/ alternation of house: The EPF loan can also help a person to get his house repaired or renovated.
Lockout: During harsh situations of lockout when an applicant may stop receiving his salary, EPF loan can help him or her to cope with basic necessities of life.
Withdrawal before the retirement: An applicant can withdraw the majority of his/ her money in PF account before one year of retirement.
EPF Loan: Rate of Interest
PF loans do not have an interest rate but you will have to pay a specific cost and this amount is calculated in terms of the amount which would have accumulated as an interest rate on the withdrawn amount had you not taken it out. The interest rate on EPF deposits is 8.5% and this rate depends on the monthly running balance.
How to Apply For EPF Loan?
There are two ways to apply for a PF loan:
Submission of a physical application
Submission of an online application
How to Apply for EPF Loan via Physical Application?
Download the composite claim form (Aadhar) or the composite claim form (non-Aadhaar) from the EPFO site
n case of composite claim form (Aadhar), you will have to fill it and submit it to the respective EPFO office. You don't need to get it attested by the employer
In case of composite claim form (non-Aadhar), you will have to fill and submit it after your employer attests it.
In case of wanting to withdraw only a certain amount from your PF account, you don't have to submit various certificates.
How to Apply For EPF Loan via Online Application?
Visit the UAN portal and enter your UAN and password to login.
Click on Manage > KYC and check that your KYC details are correct.
After verifying your details, click on Online Services > Claim (Form-31, 19 & 10C)
Your details will be displayed on the screen.
You can enter the last four digits of your bank account and click on ‘Verify.’
Select ‘Yes’ on the pop-up window to proceed.
Click on ‘Proceed for Online claim.’
Then, select the type of claim you want (full EPF settlement, EPF part withdrawal (loan/advance), or pension withdrawal) under the option ‘I Want To Apply For.’ You will not see the option if you are not eligible for PF withdrawal or pension withdrawal.
Click on ‘PF Advance (Form 31)’ and fill in the details.
Submit your form after clicking on the certificate.
The amount will be credited to your bank account within 15 to 20 days after your employer approves the withdrawal request.