PF Account Holders: To avoid paying interest for a long time, people keep exploring the option of prepaying the loan. The amount lying in the EPF account can be an alternative to this. However, is it right to repay the home loan with the retirement fund amount? It depends on which of the two has a higher interest rate.
See the difference of interest and your age
If the home loan interest rate is higher than the EPF rate, you can pre-pay the loan with this amount. Apart from this, even if you are in the early stages of your career, you can go for this option as you will have a long time to accumulate the money.
Permission to withdraw up to 90%
EPFO allows withdrawal of a maximum of 90% of the deposit amount to repay the home loan. For this, 10 years of service should be completed. Also keep in mind that the home loan has been taken from institutions like a nationalized bank, registered co-operative, National Housing Board. Under the Home Loan Repayment Scheme, EPFO members can pay EMI from their account.
How to withdraw money to repay home loan?
- Login to EPFO e-service portal.
- Enter Universal Account Number and Password.
- Click on Online Services.
- Claim through Form 31.
- Verify your bank details.
- Select the reason for withdrawal of money.
- Upload relevant documents.
Do not withdraw money from PF fund unless absolutely necessary.
Money management experts believe that one should avoid withdrawing money from PF unless it is very necessary. Interest is being given on this at the rate of 8.15%. The bigger the amount withdrawn from PF, the bigger will be the impact on the retirement fund.
How much is PF deducted?
As per the rules, it is mandatory for the salaried people to contribute 12% of their salary and dearness allowance to the PF account. At the same time, 3.67% of the amount deposited by the company is deposited in EPF. The remaining 8.33% is deposited in the Employees’ Pension Scheme (EPS).
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