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EPF Advance V/S Short-Term Personal Loan: The Better Option During Financial Crisis

By Finserv MARKETS - Jul 4,2020
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EPF Advance V/S Short-Term Personal Loan

This Situation has impacted people globally- emotionally, physically and financially. There are a lot of ways governments all around the world are helping people to deal with the crisis. With more than over 3 million people diagnosed with this pandemic, it is imperative to plan your finances for the coming months. Especially in light of an already flailing economy and unemployment steadily on the rise – the impact of the pandemic will linger long after the cases have come down and economic activity resumes.

Extent of the impact of It

Many global supply chains have been hampered and there is reluctance to hire new employees. Some employers have refused their initial appointment letters due to shut down of business across the world or have halted their hiring efforts. Many people are apprehensive, and very rightly so, and are liquidating their investments at a rapid pace in times of such uncertainties. On the other hand, people are considering online personal loans or withdrawing from their saving account to meet their daily requirements.

India’s response to the impact of Lockdown

Finance Minister, Nirmala Sitharaman, has announced a relief package worth Rs. 1.70 lakh crore to deal with the pause in economic activity throughout the country due to the nationwide lockdown. Hundreds of people including farmers, women, children, disabled and the underprivileged are known to benefit from the relief package. During an unprecedented event, such as this, people often take loans or utilize their savings. But many people do not have emergency funds to rely on. Thus, the Government of India, on 26th March 2020, allowed the non-refundable advance withdrawal of EPF funds for any crisis related financial exigency. This move is highly applauded by the salaried class who have been transferring money for years into their EPF account as retirement savings. Previously, withdrawal from the PF account was allowed only for specific purposes like housing, marriage, etc.

What does the advance withdrawal of EPF mean? 

According to the new amended rules, a person can withdraw an amount equal to Basic + Dearness Allowance of upto 3 months or 75% of the credit balance in the account whichever is lower in times of a government declared crisis like a pandemic. The EPF withdrawals are also exempt from service charge.

Although, this is a good option for such an unprecedented situation it has a huge impact on your retirement savings. The interest rate is about 8.5% which has a huge compounding effect in the long run. Any other savings scheme will not yield such high returns for such a safe investment. Such withdrawals come with certain exemptions. This withdrawal is only applicable for establishments which have over a hundred employees out of which less than 10% must earn more than Rs. 15,000 per month. For individuals not falling in this category have to look for other means of fulfilling their short term financial requirements. It is estimated that the impact of the current crisis is as bad as the 2008 financial crisis, if not worse. The uncertainty regarding the normalcy of the economy, at least in the year 2020, has left everyone petrified.

Short term personal loans during a time of crisis

The other option for most people is to opt for a short term personal loan. While most people who own a credit card depend on it for their daily expenses – which is essentially an unsecured loan- it comes with extremely high interest rate charges from anywhere between 18-42. Thus, it is always preferable to go for a short term loan.  You can avail this facility with the Bajaj Finserv Personal Loan available on Finserv MARKETS and repay the amount in a short tenure. The other benefits for opting for a short term loan include quick processing, minimal documentation and instant disbursal. With physical restrictions in place, you don’t need to worry about going out of your house,you can avail the online personal loan facility which is offered as well. Personal loans usually have less interest rates than that of your credit card which makes it a viable option in such circumstances.

Conclusion

If you have suffered a job loss, facing a salary cut or delay in salary as most people have in the last few months, and are facing a cash crunch, it is a good time to borrow money to fulfill your needs till the economy recovers and there is more certainty about the future. While anxiety and worry are common in such times, keeping you and your family financially secure can ease the burden to a great extent. From students delaying their plans to pursue a higher education to the upsetting news about the rising cases received each day, it is a tough time for people all around the world. Things are going to change, slowly and gradually, but it is our responsibility to be well equipped for anything that the future may hold.

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Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522