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PF withdrawal for home loan repayment
Firstly, assess your home loan interest rate. If it surpasses the interest rate earned on your EPF account, it might make sense to withdraw money from your EPF account to prepay the loan. However, remember that your EPF is a long-term savings plan for your future, so it’s essential to weigh your options carefully.
Individuals in the early stages of their careers might find it more feasible to withdraw from their PF account to pay off the loan. They have ample time to rebuild their savings over time.
EPFO allows for a maximum withdrawal of up to 90 percent of your PF deposit amount for repaying a home loan. However, this option is available only after completing ten years of service. Additionally, the home loan must be availed from recognized organizations such as national banks, registered cooperatives, or the national housing board. EPFO members can also opt for the Home Loan Repayment Scheme to pay EMIs directly from their PF account.
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How to Apply for PF Withdrawal for home loan repayment
If you meet the criteria, here’s how you can apply for withdrawal:
- Login to the EPFO e-service portal.
- Enter your Universal Account Number (UAN) and Password.
- Access the Online Services section.
- Initiate the claim through Form 31.
- Verify your bank details.
- Provide a reason for the withdrawal and upload relevant documents.
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Exercise Caution
Financial experts recommend withdrawing funds from your PF account only when absolutely necessary. The EPFO provides an interest rate of 8.15 percent on these funds. The more you withdraw, the greater the impact on your retirement savings. Keep in mind that EPF members are required to deposit 12 percent of their salary and dearness allowance into their PF accounts, with 3.67 percent contributed by the employer and the remaining 8.33 percent allocated to the Employees’ Pension Scheme (EPS). It’s crucial to balance your immediate financial needs with your long-term retirement goals.
Disclaimer:
The content provided in this web post is for informational purposes only and should not be construed as financial advice. Readers are encouraged to consult with financial professionals before making any significant financial decisions.
