Loan on Credit Card: Steps, Requirements, Comparisons, and Advantages

Credit card users can avail of a credit card loan from their card issuers. This comes as a very important benefit of using a credit card in India. It helps you get instant money for a variety of purposes rather than borrowing money from your friends or family. You can simply use the credit card for loan eligibility and apply for it from your credit card issuer. Know more about credit card loans and their benefits in this blog.

Understating a Credit Card Loan

Having a credit card on hand can be helpful if you have a large purchase in mind and require a large sum of money. One excellent method to handle your financial obligations without depleting your funds is to apply for a credit card loan. It comes with a simple application procedure that allows you to get a pre-approved loan amount linked to your credit card limit without requiring collateral.

This kind of loan functions similarly to a standard loan, except it is connected to your credit card. Depending on the rules established by your card issuer, it permits you to borrow a percentage of your credit card limit or even to extend a loan amount beyond what is allowed on your card.

Let’s talk about how this loan process actually works. 

• Your credit card activity and credit limit have already been used to authorise your loan.

• No application is required, and the amount of the loan that you are eligible for is either based on the percentage of your credit limit or on an additional amount that the card issuer has authorised. 

• Generally, you repay the loan over a certain length of time in payments known as EMIs.

• Although it may vary depending on the bank and your credit history, credit card loans usually have lower interest rates than credit card balances.  

Should You Take a Loan On Your Credit Card

• Zero Collateral Needs

When you apply for a credit card loan, you do not need to furnish any collateral, such as money or real estate, in order to be eligible for the loan. 

• Instant Access to Funds

Access to fast funds is a significant advantage of this loan since it pre-approves the loan based on your credit card information, saving you the trouble of drawn-out approval processes and additional paperwork.  

• Flexible Repayment Options

Repay the loan easily by making fixed payments or EMIs. This method assists in handling your finances by enabling you to repay the loan in convenient installments over a period of time. 

• Lower Interest Rates

Credit card loans are typically more cost-effective than holding a balance on your card without paying it off in full since the interest rate is typically lower than the interest charged on credit card payments.  

• Flexible Tenure

In order to efficiently suit your budget, banks generally provide various repayment choices for loans taken out against credit cards, which can range from a few months to many years.  

Things to Know Before Taking a Loan Against Credit Card

• Interest Rate

Even while a loan on a credit card offers an affordable rate of interest, it is important to check it with your bank. Take time to compare the rates and before deciding. This can help you lower down the overall cost of the loan over the decided time period for repayment.

• Impact on Credit Limit

Funds are usually deducted from your credit limit on the credit card when you take out a credit card loan. It's crucial to monitor your lowered spending limit, particularly for large purchases, as this may restrict your card's spending capacity.

• Prepayment Charges

Be aware that certain banks may charge a fee if you decide to return the loan before the term is finished, so be sure to ask about any prepayment fees before deciding.

• Late Payment Charges 

Missing EMI payment deadlines can result in fees and a decline in your credit score, and it's just as bad as missing credit card payments. Therefore, it's helpful to have a plan in place to pay back the loan on time.

How to Apply For a Credit Card Loan and Eligibility 

The eligibility for taking a loan on a credit card is very simple. You just need to have a good history of using your credit card along with a good credit score. Coming to the documentation part, there is no need to provide any paperwork as this loan is a pre-approved loan from the bank.

Here’s how to apply for the loan:-

• You can use the internet banking platform of your bank and go to the “cards” section and apply for “personal loan on credit card” and the amount will get into your account after approval from the bank.

• Similarly, you can use the bank mobile app and click on “Cards” and get to the application section and submit your loan request. 

Conclusion 

Using your credit card to take out a loan is a smart way to get money quickly when you need it. Whether for handling costs, major expenditures, or financial crises. In times of need, getting a loan on a credit card is a suitable financial alternative that can really save your time. However, before committing, it is important to consider the credit card loan's interest rate, terms of repayment, and your ability to make payments.