EPF Advance vs Short-Term Personal Loan – Which one to Choose?

The current financial crisis due to COVID-19 pandemic has taken a hard hit on employment in all business sectors. People from various sectors of society are going through an unimaginable financial crisis. Lots of employees had to take a salary cut, and many had to lose their jobs without getting prior notice. Considering the current financial situation, the Employees’ Provident Fund Organisation (EPFO) has given relaxation towards the norms for account withdrawal. It is aimed at helping employees who are facing a financial crunch.

When employees need financial assistance, they tend to take a personal loan or borrow from EPF. In a situation when an employee does not have an emergency fund or existing investment, they have to choose among the two options. However, neither of them is an ideal option as short term personal loans are offered at high-interest rates, and EPF borrowing hampers your retirement savings. This article will help you understand which option will be the best for you.

EPF Advance:

The latest non-refundable EPF advance facility provides people with an ability to make a withdrawal of up to 75% of the corpus amount or “Basic + Dearness Allowance” component up to three months salary of the employee, whichever is lower. You can easily avail it as the restrictions are laid off by the government.

Experts have advised not to borrow from your EPF account as it takes a dig on its most significant advantage. When you keep your money in EPF account for a longer duration, it gets you more compounded interest, while taking the money out of it hampers your retirement corpus. However, if you are in urgent requirement of financial aid, you can consider this option. 

Personal Loan:

A short term personal loan can come in handy for your urgent financial requirements. However, as these loans are provided without security, they come with heavy interest rates. Personal loans are termed as high-risk credits, and you would need to have a good credit score to minimise the interest rates.

If you are considering this option, check the documents required for a personal loan and also calculate your monthly EMI with the help of an online personal loan EMI calculator, to make sure that you get smooth approval for your loan application and easy EMI. Another disadvantage of personal loans is that you end up paying a lot more to your lenders as most of them won’t allow part payments. 

Personal loan vs EPF advance:

Considering EPF advance would be a better option due to high-interest rates on personal loans. The interest you earn in EPF is 8.5% annually, and it is much lower than the personal loan at 10%-18% interest rate or credit card loan at 18%-42% interest rate. 

For a medical contingency, EPF withdrawal can be a quicker option, and you would not have to pay sky-high interest. In case you have lost your job, your EPF advance can help you keep up with your expenses, and it won’t add debt to your name. After all, getting a new job might be difficult in the current conditions, so it is better to avoid the unnecessary burden of debt repayments.


Taking an EPF advance is a better option than getting an unnecessary debt that might get you in trouble. The interest you earn from EPF is far less than what you would have to pay for a personal loan. However, you can consider taking a short term personal loan if you can make up for the interest that you have to pay back. You can check out the documents required for a personal loan to make the process quicker.

About stephen

Leave a Comment