EPF Withdrawal: Is it right or wrong to pay a home loan with EPF money? Understand the full calculation..

It is everyone's dream to have their own house. To fulfill this dream, many people resort to home loans. The tenure of a home loan is quite long. Due to this, a large part of the monthly income of employed people is spent on paying the loan EMI. In this situation, some people also plan to repay the home loan with the money of the Employees Provident Fund (EPF).

If you also want to repay the home loan from EPF, then you must keep some things in mind.

Pay attention to the difference in interest.
EPF is usually one of the schemes paying the highest interest. But, if the interest rate of your home loan is higher than the interest rate on EPF, then you can use this amount for the pre-payment of the loan. For example, right now the interest rate on EPF is 8.25 percent.

At the same time, most banks are offering home loans at a rate of 8.5 to 10 percent. If the rate of your home loan is 9 percent or more, then only you should consider the option of pre-payment of home loan from EPF amount.

Age and career are also important factors.
If you are young and in the early stages of your career, then you can choose the option of repaying a home loan (EPF Withdrawal process) from EPF money, because you will get enough time to prepare a retirement fund again.

EPFO allows withdrawal of a maximum of 90 percent of the deposit amount to repay the home loan. But, for this, you have to fulfill the condition of at least 10 years of service. Under the Home Loan Repayment Scheme, EPFO members can pay EMI from their accounts.

How much money to withdraw from EPF?
EPF is an important part of your retirement planning, so you should think well before withdrawing money from there. It should generally be tried as a last option only. Also, you should avoid withdrawing the entire amount from EPF. This can ruin your retirement plan.

Currently, it is getting 8.25 percent interest. The more money you withdraw from EPF, the more impact it will have on your retirement fund. Also, you should understand the tax rules well while withdrawing money from EPF. In some cases, you may also have to pay tax. Also, you may have to pay a penalty for withdrawing money before time.

How to withdraw money from EPF for a home loan?
Login to the EPFO e-service portal.

Enter UAN and password.

Click on Online Services.

Make your claim through Form 31.

Verify your bank details.

Select the reason for withdrawal.

Upload the relevant document.

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