EPF Advance Vs Personal Loan: Which One is Better?

During financial crises, people often seek assistance through various means, including loans. Two viable options for financial aid in difficult times are EPF advance and personal loans. While both of them provide much-needed monetary help during times of need, they have their own advantages and disadvantages. Read to know all about EPF advance vs personal loan to determine which is the better option for you.

What is EPF Advance Withdrawal? 

EPF advance withdrawal allows employees to access a portion of their Employee Provident Fund (EPF) before retirement. You can withdraw EPF funds for particular needs like education, home renovation and medical emergencies. 

You can withdraw a maximum of 75% of your EPF balance as an EPF advance or even up to three months' worth of dearness allowance+salary.
Eligibility to Withdraw EPF Advance

Here is a list of requirements for eligibility concerning the withdrawal of EPF funds in advance:

• Withdrawal of EPF for Property and Land

You can withdraw funds to acquire houses or land if they have served for a minimum period of 60 months. 

• EPF Withdrawal for Homes

For homes, you can withdraw up to 36 times their basic salary along with an additional Dearness Allowance (DA). The maximum withdrawable amount for land is 24 times of the monthly basic salary (including the DA). 

• Withdrawal for Marriage and Education

People who have served 84 months or more can withdraw funds for marriage and education. When withdrawing for these reasons, the withdrawable amount is 50% of the employee's contribution towards EPF funds. 

• EPF Funds Withdrawal Before Retirement

The minimum age for withdrawing EPF amount before retirement is 54 years. In such instances, the withdrawals are limited to only 90% of the accumulated contributions plus interest. 

• Withdrawal of EPF Funds Under Medical Emergency

In the event of a medical emergency, you can withdraw either six months' basic salary or the total contributions you have made as an employee.

What is a Personal Loan? 

A Personal Loan is an unsecured loan offered by financial institutions, meaning it does not require collateral. The loan amount is determined based on the borrower's repayment ability, income level, credit history, and employment status.

Also known as consumer loans, personal loans are multipurpose and can be used for various immediate financial needs. Since they are unsecured, lenders consider them high-risk, making a good credit score essential for approval.

Eligibility to Withdraw Personal Loans 

To apply for a personal loan, you need to meet the following requirements:

• To avail this loan, borrowers need to be between the ages of 21 and 58.
• An applicant for this loan also has to be a citizen of India.
• A minimum monthly income of ₹15,000 is required with income verification proofs.
• Personal loans are only available to borrowers who have no history of default in the previous years.
• Borrowers need to have a good credit history to apply for a personal loan.

Differences Between EPF Advance vs Personal Loan 

There are a lot of EPF Advance vs Personal Loan differences to be considered when considering the better option:

Final Words

EPF advances and Personal loans are both valuable resources for individuals who seek financial assistance during dire circumstances. When comparing both EPF advance vs Personal loans, the better option for you depends on your personal preference and choice.

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