Personal Loans Vs Car Loans – What’s The Difference

If you’re looking to make a major purchase or investment like purchase a flat, a vehicle or wish to fund any high ticket expense, then, a loan is one of the wisest options to take. When it comes to seeking financial aid in order to take care of expenses, personal loans are car loans are among the top preferred options. Both these types of loans are easy to obtain, given that they do not carry extensive or stringent eligibility requirements. To provide added convenience to customers, many banks and lending institutions now allow you to apply for personal loan or car loan via their website, where the loan is usually approved within a short time, assuming that the customer meets the eligibility criteria.  

As the names suggest, personal loans and car loans are quite distinct from each other, primarily in terms of the need or financial requirement which they fulfill. Personal loans can be taken to address a number of personal financial needs, expected or unexpected. Personal loans can be taken to fund a wedding or any social function which may have to be arranged in the family, to pay coaching classes tuition fee, to fund a family vacation, to re-furnish the interiors of your house, to fund the cost of an emergency medical treatment, to repay long-standing debts, etc.

A car loan, however, can only be taken to purchase a new or a second hand car, depending on the loan. If you wish to purchase a car, a car loan is the most appropriate loan which is designed for this purpose. Following are some of the terms of difference between car loans and personal loans, which will help you distinguish between the two and make an informed decision.

Personal Loans (Unsecured)

A personal loan is a loan which is taken to address financial needs of a personal nature. These may be expected or unexpected requirements which may arise with time or suddenly. For a personal loan, the borrower is provided with funds by a bank or a non-banking finance company. The entire loan amount is paid by the lender and can be used by the borrower as per their discretion.

Personal loans are available in two types, secured and unsecured. A secured personal loan is provided against a security which holds certain value. If the borrower fails to pay the loan, the lender may seize the item which has been pledged as security against the loan in order to cover the loss. The other type is an unsecured personal loan where the loan is provided without the borrower having to pledge anything as security or collateral against the loan.

Interest Rates

Unsecured personal loans carry significantly higher rates of interest, as compared to secured personal loans which require a collateral to be provided. Additionally, unsecured loans are accompanied by far stricter eligibility requirements, which usually require the borrower to hold a near excellent credit history. If you do not have a healthy credit history, getting a personal loan may be difficult. For personal loans, the amount of loan provided and interest applicable on the loan is largely determined based on the borrower’s credit rating. Interest on personal loans may be fixed or variable. Hence, if you hold a healthy credit score, then it is easy for you to get a personal loan. However, a bad credit history can greatly dim your chances of getting a personal loan.

Repayment Term

Personal loans usually have a fixed repayment term which is specified in months like 12 months, 24 months, 36 months and so on. If you have taken a personal loan with a longer term, then you monthly repayment amount will automatically be lower. However, you will be paying a higher amount as interest towards the loan over the longer term. On the other hand, a shorter term personal loan will up your monthly repayment amount but will attract significantly lesser amount towards interest on the loan as you will be repaying the loan in lesser time. Hence, to sum up, following are the pros and cons of a personal loan. 

Pros

·   No restrictions on end-use of funds.

·   Flexible repayment schedule – short term or long term.

Cons

·   Interest rates tend to be considerably higher.

·   Stricter eligibility requirements.

·   Poor credit scores can eliminate your chances of getting a personal loan.

Car Loans (Secured)

Car loans, as the name suggests, are used for the purchase of a new or used car. Car loans are secured loans where the vehicle which is purchased serves as the security or collateral against the loan. In case the borrower fails to make the repayment on the car loan, the lender may seize the purchased vehicle to recover the loss. Like any other type of loan, car loans are also repaid in fixed installments over a period of time which is specified at the time of taking the loan. Also, like other loans, the lender will assume ownership of the purchased vehicle until the entire loan amount has been paid off.

Interest Rates

Since a car loan is a secured loan where the vehicle purchased serves as security, car loans are significantly low-risk loans for lenders. For this reason, interest rates on car loans will be significantly lower as compared to personal loans. Also, interest on car loans are mostly fixed and not easily subject to change.

Repayment Terms

Car loans are usually provided for longer terms of 36, 48 or 60 months. Unlike personal loans, where credit history is the primary determinant for loan approval,  car loan does not put as much weight age on the borrower’s credit history.  A borrower with a less than ideal credit record can also get a car loan. Also, unlike personal loans, the amount of loan and interest rate applicable on a car loan is dependent on the price of the vehicle (new cars or the condition of the car (for used vehicles). Before you settle for a particular loan, do some research on other available options for car loans. To sum up, here are the pros and cons of car loans.  

Pros

·   Usually offered at lower interest rates.

·   Credit history not a stringent determinant for obtaining the loan.

·   May be advantageous as an ‘on the spot’ financing solution.

Cons

·   Ownership of the car remains with the lender until complete loan has been repaid.

·   Borrowers usually required to make a down payment or up-front deposit to secure the loan.

Whether it is a personal loan or a car loan, the rates and terms of the loan will vary from one lender to the other. Hence, before you settle on a particular loan, it’s always advisable to research for other available options offered by other banks. Explore all options like banks (public. Private, big and local), non-banking finance companies, credit unions and any other lending platforms. Finally settle for a provider which offers you a loan which is the closest fit to your financial requirements.

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Loans against Securities: What are your Options?

Generally speaking, loans are classified as secured or unsecured. Secured loans are those that require the borrower to pledge an asset as collateral while unsecured loans are granted to customers without taking any guarantee but at a higher rate of interest. However, alternative means have been made available for individuals who wish to have their applications processed quicker whilst availing loans at interest rates that are far more attractive in comparison with conventional personal loan. Following are the five most popular loans against securities you can avail in India.

Loan against Gold: An increasing number of financial institutions and banks in India offer loans to customers who pledge their gold jewellery as guarantee. Processing of such a loan is usually done extremely quickly, ranging from a few hours to two-three days. The interest rate of the loan will depend upon the margin of safety left with the lender. For instance, if you require a loan worth Rs.5 lacs and pledge gold worth Rs.8 lacs, the margin left with the bank will be Rs.3 lacs, which is healthy enough for you to avail an attractive interest rate. However, taking loans that are around 80-90% of the worth of gold pledged will result in a higher interest rate.

Loan against Fixed Deposits: Individuals with long-term fixed deposits can avail loans against the investment instruments if they do not wish to break them. The amount of money you can get through such a loan is between 75% and 80% of the current value of your fixed deposit, and the interest rate applicable on the loan will be around 1% or 2% more than the rate accrued on the fixed deposit. For instance, if the current worth of your fixed deposit is Rs.8 lacs, and the interest accrued on it is 8%, you can avail around Rs.6.5 lacs at 12%.

Loan against Insurance Policies: Loans against insurance policies can only be taken if the policy has a surrender value. For a policy to accrue surrender value, premium payments must be done regularly for a period of at least three years. Once your policy has a surrender value, you may avail a loan to the extent of 90% of said value. For instance, if the annual premium on a LIC endowment policy is Rs.30,000, and you have made premium payments for 10 years (total of Rs.3 lacs), the surrender value of your policy will be around Rs.2 lacs, and you can avail a loan to a maximum of Rs.1.8 lacs. You may choose to avail the loan either from banks or LIC, and the policy will be pledged to the lender. If you are unable to repay the sum borrowed, you will have to surrender your policy so that the lender recoups the money you owe them.

Loan against PPF: PPF or Public Provident Funds can also be placed as collateral for a loan. However, certain restrictions mean that loans can only be availed from the third to the sixth year. Also, the amount of money you will receive will be no more than 25% of the amount remaining in your account two years back. For instance, if a loan is taken in the fifth year post opening a PPF account, the amount of money you will receive will be 25% of the balance in the third year. So if the balance was Rs.4 lacs in the third years, you will only be eligible for a loan worth Rs.1 lac.

Loans against Mutual Funds: Shares and mutual funds can also be pledged to avail loans. However, the shares and funds that can be used to take loans must be approved by the bank as the value of these instruments are very volatile, thus requiring a high level of margin. The amount of money you will actually receive from the loan will be significantly lower than the value of the shares you will pledge in return.

Loan against Property: Commercial and residential properties can be pledged as collateral to avail a loan. Most lenders sanction up to 50% of the property’s current market value, or 30 to 40 times the borrower’s monthly income. Depending upon the size of the loan, the interest rates can vary from 13% to 16%. Loans against property are ideal for major expenses such as weddings, expansion of business, etc.

These alternatives can prove effective in times of emergency as your application will be processed sooner than usual and the loan will be granted to you immediately provided you meet all eligibility criteria.

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How to Get a Long-Term Personal Loan

Sometimes, you may not be able to pay off your personal loan in one or two years. Maybe the EMIs for short-term loans are too high, or you don’t have enough back-up funds or income to pay off the loan soon. You might want a larger loan amount, or you might want to show a long-term loan on your account for Income Tax or other personal reasons. Whatever the reason, long-term loans are easy on the pocket and trouble-free if you fulfill certain basic borrowing conditions.

Advantages of a long-term loan

In India, the maximum tenure for which you can get a personal loan is 5 years. Extending your personal loan to 3 years or more is advantageous in terms of EMIs and obtaining higher loan amounts. The longer your repayment tenure, the more the amount you could borrow. Of course it also depends on your monthly income and the bank’s discretion.

If your income is Rs. 50,000 and you can afford to keep aside around one-sixth of that (Rs. 8350) for the EMI, you will be able to get a personal loan of Rs. 3.5 lakh at 15.25 percent interest. For the same amount and interest rate, a short-term loan of 1 year will make your EMI as high as Rs. 17,000.

Preparing for a long-term loan

To get a long-term personal loan, you need to be prepared with certain documents and a plan to repay the loan regularly. Let us look at the preparations you need to make and the criteria you need to meet in order to secure a long-term personal loan.

●       Ensure a good credit score: A high credit score is important for you to be able to win the trust of the bank or financial institution. That will convince your lender that you will not default on payments. If you have failed to make any repayment or have made too many later repayments during previous loans or credit card bills, your credit score will be low. A CIBIL rating of 750 or above is considered a good credit score and makes you eligible for a loan, if all your documents are in order.

●       Provide all necessary documents: Keep all the documents requested by the bank – proof of identity and address, salary slips, etc.  – handy. Fill out the loan application truthfully and in its entirety. This will ensure that your loan request is not rejected.

●       Assess interest rates: Check the interest rates offered by various banks before obtaining a long-term personal loan. At a higher interest rate, you will end up paying more money as interest if the period of loan is longer. If you are taking a loan of Rs. 3 lakh at 18 percent interest for five years, you end up paying around Rs. 1.57 lakh as interest during the tenure of the loan. But if the interest rate is 12 percent, your interest payments at the end of 5 years will be Rs. 1 lakh only.

●       Choose a legitimate lender: Always take loans from trusted financial institutions, whether they are nationalized, cooperative or private banks, or other recognized financiers. You could be cheated by unrecognized lenders through hidden charges, exorbitant interest rates or illegal transactions.

●       Check for penalties and hidden charges: Personal loans often come with hidden charges, loan booking or processing fees, and penalties for late payments of EMIs. Ensure that you are not being taken in by glib loan executives, by checking all the fees and deductions made from the loan at the time of disbursement. You could cross-check through EMI calculators online whether the monthly installments mandated by the lender are accurate with regard to the interest and processing fees.

●       Ensure regular repayment: Choose a loan amount that you will be able to repay regularly. You need to remember that defaulting on your loan or making too many late EMI payments will reduce your credit rating. In this case, you are more likely to be rejected for another loan or credit card the next time you need one.

●       Avoid taking multiple loans: If you are taking a long-term loan, it is advisable to avoid taking multiple loans as that affects both your repayment capability and your credit score. The more loans you have in your name, the more difficult it would be to be regular in paying back each of their EMIs.

By making an informed choice regarding interest rates and other banking fees, you can choose the loan plans most suitable to you. A long-term personal loan will help keep your EMIs low and make repayments more affordable. This will keep your finances in order and you can lead a tension-free life. 

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Which is a better investment option for your child? SSA v/s Children Mutual Funds!

Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana account is a government scheme launched by the Prime Minister of India with the main purpose of helping parents and guardians save for their girl child’s future from a very young age. The scheme can be opened for any girl child of 10 years and below and only one account can be opened per child. The account has to be paid for 14 years from the initiation of the account and the account also offers tax benefits.

Children Mutual Funds

Children mutual funds are mutual funds that are designed specially for children. It is a professional fund wherein the money is invested in bonds, stocks and other securities. It is a high risk investment which yields high returns. The account is available for both the girl and boy child.

Comparison between Sukanya Samriddhi Yojana and Children Mutual Funds

Feature	Sukanya Samriddhi Yojana	Children Mutual Funds
Eligibility	Available only for girl children	Available for both girls and boys
Maximum age limit for opening the account	10 years and below	18 years (also depends on the policy)
Number of accounts	Only one account can be opened per girl child	There is no limit on the number of accounts that can be opened
Rate of interest	The current rate of interest offered for the account is 9.2%	The rate of interest is linked to the market and keeps changing often
Partial withdrawal	A partial withdrawal can be made once the girl child attains the age of 18 years	Partial withdrawal is allowed usually three years into the policy
Availability for NRIs	The account is not available for NRIs	Most of the mutual fund accounts are available to NRIs (even if the child is an NRI)
Minimum and Maximum deposit	The minimum amount that has to be deposited in the account is Rs.1000 The maximum amount that can be deposited in the account is Rs. 1,50,000	The minimum amount that has to be deposited in the account is Rs.500 There is no cap on the maximum amount that can be deposited
Where is the money invested?	The money is invested for development of the country for better infrastructure, better roads, etc	The money is invested in equities and other market linked investments
Term of the policy	It is a long term policy	It is a long term policy

How to decide which is the best investment option between SSA and Children Mutual Fund?

Both Sukanya Samriddhi Yojana account and Children Mutual Fund schemes are good investment schemes with amazing benefits. But Children Mutual Fund is best suited for investors who are high on the risk appetite as it is a high risk- high return investment scheme. Sukanya Samriddhi Yojana account carries no risk but does not offer returns as high as Children Mutual Fund schemes. Sukanya Samriddhi Yojana is well suited for individuals who want to invest in a low risk investment scheme for their girl child.

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Snippets about Personal Loans and Personal Loan Calculators

The ease of availing a personal loan is often outweighed by the fact that it is mostly an unsecured loan and requires you to furnish no reason whatsoever when applying for it at any financial institution. This ease and convenience of this particular type of loan often leads us astray while managing our finances as far as the loan is concerned. Where does the safety net end and where do the hellholes of debt crunch start? It is imperative to understand the limits of both to maximize the benefits of a personal loan. Let’s take a quick look at how this double edged sword can help you slash your worries and how to shield yourself if and when your slash bounces back at you.

Many of us have salary accounts, savings accounts and/or current accounts and with the age of internet banking in full swing, I can presume almost 90% of people reading this article are as tech savvy as to conduct most if their transactions online. Based on one’s income and transactions, most banks take about 4 to 5 months before starting to contact you about pre-approved personal loans, home loans, car loans and the ubiquitous credit card. All that sounds really fascinating, considering that a bank is actually offering you something without being asked for. You are on cloud nine. Take a moment and look down at the hard ground that is your real financial life.

Banks generate pre-approved offers based on mainly three aspects, your income, your credit history and the organisation that you are working for. Let alone a year, even if have been with a bank for close to a decade, it hasn’t got the foggiest idea about your personal financial life. All it sees is the balance sheet which shows how much you get and you much you spend. If you have your kid’s education to take care of, a cool bike’s EMI to pay off or are saving up for that memorable Valentine’s Day gift, the bank doesn’t care a damn straw. This is the first pitfall that most newcomers to personal loans fall prey to. Your best financial manager is you, provided you keep a tab of the cash inflows and outflows. The personal loan amount that you checked using a personal loan calculator is just a ballpark figure that the bank is comfortable to part with, temporarily.

Personal loan calculators, though nifty and time-saving, often give a rough estimate of what interest rate you would be offered, considering the loan amount that you have applied for. Take that interest rate with a grain of salt, or rather, with a molecule of salt. Based on your actual credit reputation and earlier financial transactions with other banks and institutions, along with your company’s listing in the bank’s charts, the oddities might land you with a higher rate of interest. Speak to the bank for a clearer picture before rushing headlong into that sweet credit beeline.

Always remember that in the world of personal loans, a loan calculator’s result might be mathematically correct, but has chances of differing when it comes down to the actual doubloons. Always bear in mind that whatever EMI you get out of a personal loan calculator has to be less than 30% of your monthly income. Keeping that point in the fore, you can safely wade the waters of personal loans without a risk of gulping down a few forced mouthfuls into your financial re breathing tank.

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What are Loans against Securities (LAS) and why do we get better Interest rates on them?

Banks offer loans to help people like you and I fulfill their financial requirements, and there are a whole bunch of different kinds of loan products available today, both secured and unsecured, and which can be utilized for various purposes. Interest rates, tenures, total loan amounts disbursed, etc. depend on many factors of eligibility and repayment ability (which is usually determined through your CIBIL score). But there is another major factor that can enable more favorable terms for your loan – whether or not your loan is given against a security.

A security is basically an item, asset, policy, documents, etc. that have a certain value that can be placed as collateral against a potential default on repayments on your part. Suppose you take a secured loan like a car loan, against the collateral of the car itself – if you default on repayments in a way that coincides with terms for the same in your loan agreement – the lender will have the right to cease your vehicle and recover its losses. The same goes for home loans, where the bank can recoup its losses through ceasing your home and placing it for open sale on the market, etc.

It isn’t the best feeling when you default on repayments and have to surrender something of value, but the terms on which you will get the loan will be more favorable if you show the bank that you are so confident in your ability to repay that you are even placing your home / vehicle / assets on the line.

Here’s a list of other assets / securities that can be placed as collateral against your loan:

     -      Mutual Funds.
-      Non-Convertible Debentures.
-      NABARD Bonds.
-      LIC policies.
-      UTI Bonds.
-      KSC / KVP (in DEMAT form)
-      Demat shares.

Features of Loans against Securities

Given below are some of the general features and benefits of Loan against Securities

     -      In the bank or financial institution where you pledge any of the above assets, an overdraft facility will be created for you to use.
-      The total amount of this overdraft depends on the value of the pledged asset – and will be in proportion to the loan eventually disbursed.
-      Loans taken against securities usually have the added benefit of being disbursed through a special current account that’s opened in your name – and interest starts to accrue after you start using the money.
-      Loans against securities are treated as secured loans and thus carry lower rates of interest and more favorable terms for the borrower.
-      Banks usually charge around 2% processing fees for LAS.
-      Higher loan amounts are generally disbursed in the case of secured loans versus unsecured loans.
-      Prepayment charges generally do not apply in the case of LAS.
-      Another excellent benefit of taking out a loan against securities is that, if you’re able to pay it back on time in accordance with the terms on which you took the loan – you also get back the security that you’d initially pledged – and will be eligible for all the benefits carried by the security. It’s just like placing the security in a temporary state of suspension till you get your other work done for which you needed a loan, and then enjoy the financial product / asset / security that you had placed as collateral.

Documents required for Loan against Securities

Here’s a list of documents that you will need when applying for a Loan Against Security (LAS):

   -      Proof of Identity: Could be anything that contains your name as an official record – passport, PAN card, driving license, etc.
-      Proof of address: Could be anything that contains your official correspondence address (as on official records) – passport, driving license, etc.
-      Proof of office address: This is for non-salaried people who have their own undertakings – office address proof can be phone bills, internet bills, etc. made out to the company as an entity conducting business from “x” office address. Must be the official correspondence address of an operations / head office.
-      Proof of business incorporation: This is for non-salaried people who have their own undertakings – to prove that the business actually exists – an incorporation certificate / other document issued by a competent authority confirming the existence of the business must be submitted.
-      PAN Card: The Permanent Account Number assigned to you must be communicated to the bank.
-      Photographs: Recent passport sized and / or stamp sized photographs, depending on the bank you borrow from.
-      Bank statements: For the last 6 months, must be attested.
-      Cancelled Cheque: A cancelled cheque from your bank account must be submitted.
-      Demat Account Statement.
-      Income proof: Proof of income from salary slips, balance sheet of business, etc.

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Provident Fund Details for UAN

Almost 18 months after UAN (Universal Account Number) was allotted, just 52% of provident fund subscribers who fell under the Sub Regional Office of EPFO’s jurisdiction in Vishakhapatnam registered their mobile numbers, causing an element of surprise as UAN registration allows a member of EPF to gain access to a variety of facilities such as knowledge of the balance details, downloading active UAN card, updating KYC details and portability of UAN-linked accounts.

Individuals who have subscribed and registered their mobile numbers with UAN have their details such as bank account number and Aadhaar number seeded in their UAN. Also, individuals who have their UAN activated can directly submit their claims in Form-10C, Form-19 and Form-31 to the Commissioner and will have no need to attest their employers to settle their claims.

R.K. Sahoo, the regional Provident Fund Commissioner, recently stated that every employee who has his / her bank details and Aadhaar number seeded as KYC in addition to their employers completing due verification with the use of details and digital signature taken in Form-11 may file their settlement claims directly with the Employees Provident Fund Organisation. The other employees who have not completed verification or had their number seeded in the UAN must submit the existing forms under 10C, 19 or 31 as applicable to file withdrawal claims.

Mobile Application

In keeping with the m-governance initiatives, a mobile application has also been released so that individuals can now activate their UAN accounts from their mobile phones in order to gain access to their accounts and subsequently checking and keeping track of their monthly credits along with the other details the EPFO has available.

Pensioners of Employee Provident Fund can access details related to their pension disbursement. Even employees can check details regarding their remittance using the mobile application. Individuals also have the option of activating their accounts by simply sending a text message. The message must contain ‘EPFOHO Act’, the 22-digit member ID, and the 12-digit UAN number from their registered mobile number to 7738299899.   

SMS Facility

Individuals who are registered with UAN can gain information regarding their KYC details by simply sending a text message to 7738299899. The EPFO will reveal the information if contacted on the aforementioned number. In case an individual’s UAN number is seeded with any of the PAN, Aadhaar or bank account number, the individual will receive details regarding the previous contribution as well as details regarding the Provident Fund balance. The SMS facility can be availed in 10 different Indian languages except English.

Speaking about the SMS facility, Mr Sahoo revealed that the Sub Regional Office, Vishakhapatnam, was among the primary offices in the country to move to the e-payment system. It started with pensioners via the Core Banking Solutions platform, and Mr Sahoo added that around 66, 757 pensioners are currently served by the Sub Regional Office and that they are receiving their pensions regularly by the first day of each month.

Missed Call Facility

Individuals who are registered on the UAN portal can gain information regarding their details by simply giving a missed call to 01122901406. The EPFO will reveal the relevant details if you call the aforementioned number from your registered mobile number. In case the UAN number is seeded with any of the PAN, Aadhaar and bank account number, the individual can also receive details of the Provident Fund balance and the previous contribution.

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When must you opt for a Loan against Property?

Lenders are seeing a steady growth in the loan against property segment. Most borrowers are opting for this facility as it is a secured loan and it attracts a lower rate of interest. The loan amount depends mainly on the value of the property that is determined by its location and age of the property and the quality of construction.

Over the past 3-4 years, the loan against property segment has grown at a compounded rate and now stands at Rs.2.3 trillion.

The loan against property must be opted when you are in dire need of a huge amount of cash. Most commercial loans are offered at a higher rate of interest and since this is a secured loan, you can get it for a reasonable rate of interest. The loan tenure offered ranges between 10-15 years which puts less burden on its repayment.

Most individuals take a property first to ensure that their future is secured and the property usually just sits idle most of the time. Loan against property enables you to unlock its potential and the huge loan amount can be used to finance your business or meet any big expenditure that you have. But it is advisable that you take a loan against property to expand your business instead of starting it. Starting a business could go either ways, so it is best to know that you can make profit out of it and you must be confident that the returns that you get after the expansion will help you clear out the loan.

Having said that, it is a risky decision that you take. If you are unable to repay the loan or if you default on the installment amount, your credit score will be affected badly and that makes it very difficult for you to take any further loans with ease and for a reasonable interest rate. Always ensure that you are in position that the loan can be repaid on time and that you have enough flow of income or flow of cash from your business. Take care of the loan first. Servicing the loan is very important. If you are coming across a huge profit or an extra income, clear off the loan before you do anything, because the sooner you get it cleared, the better it is for you.

Defaulting in making payments for the loan will lead to the lender seizing your property that took years to build. You share memories and sentiments with the property, so it is very important that you take the loan seriously and work towards clearing it off at the earliest. 

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Benefits of Sukanya Samriddhi Account

Sukanya Samriddhi Account

Launched in January 2015, Sukanya Samriddhi Scheme, a small savings scheme, helps an account holder accumulate savings for the education and wedding of his or her girl child. A Sukanya Samriddhi account can be easily opened - in any post office or designated bank branch across the country - on behalf of a girl child till she turns ten, by her guardian. One Sukanya Samriddhi account is permitted per child. A Sukanya Samriddhi account can be opened for up to two children (account can be opened in the name of the third child in case of triplets or twins). An account can be opened with just Rs.1,000 (initial deposit) and in multiples of Rs.100 thereafter. The minimum deposit is Rs.1,000 while the maximum is Rs.1.5 lakh in a financial year.

Main Benefits of Sukanya Samriddhi Account

The following are the main benefits of Sukanya Samriddhi Account

• Highest Interest Rate: The government is currently offering the Sukanya Samriddhi Account (SSA) at 9.20%. The interest rates for the scheme can be revised every financial year. According to experts, government wants to maintain around 0.50% differential between Sukanya Samridhi Yojana and PPF.  Sukanya Samriddhi Account  offers the highest interest rate of all small savings schemes available in the country. It is important to note that the rate of interest for this scheme is market linked.
• Lock-in Period

Sukanya Samriddhi Account matures when the girl child attains 21 years or when     she gets married, whichever is earlier. The girl child should, however, be 18 years old at the time of her wedding. Also, partial withdrawal (50% of accumulated amount) can be made for the purpose of education of the girl child when the latter turns 18. However, in PPF, partial withdrawals are allowed from the seventh financial year onwards. Sukanya Yojana, therefore, combines a long lock-in period with higher returns.  

• Tax Savings

Investors can avail up to  Rs. 1.5 lakh as deduction under Section 80C of the Income  Tax Act, 1961. The Sukanya Samriddhi Yojana qualifies for EEE tax status (100% tax free - deposit, withdrawal and growth). Account holders can avail of tax benefits available under the scheme.             

• Maturity Proceeds

Upon attainment of 21 years by the girl child, the Sukanya Samriddhi Account can be closed. One of the unique features of Sukanya Samriddhi account is that unlike other schemes, interest is accrued even after maturity. If account holders do not close the account at the time of maturity, the balance amount in the account will continue to earn interest until the account is closed.

• Account opening/Transferability             

A Sukanya Samriddhi account can be opened at any authorized bank branch or post office with simple documentation such as birth certificate, residence proof, identity proof and photographs of legal guardians/parents. A Sukanya Samriddhi account is opened by guardian/parent on behalf of a girl child till the latter turn 10. Sukanya Samriddhi account can be transferred across India.

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