Loan on Credit Card: Features, Benefits, Eligibility and Steps to Apply
A loan on credit card is a type of personal loan that can be acquired when individuals are in dire need of funds. If an individual owns a credit card, he/she can easily apply for instant credit against their card. Unlike a traditional personal loan, a credit card loan does not include extensive documentation.
The loan amount extended by the concerned financial institution to the credit card holder is in the form of a demand draft or direct bank transfer. Since this loan is linked to being close to a personal loan, the interest rate levied on it is comparatively higher.
What is a Loan on Credit Card?
A loan against credit card is one of the most effective options for individuals who require urgent funds to meet unanticipated financial requirements. Usually, individuals go for such loans when the overall limit of a credit card does not suffice to fund necessary financial requirements.
Loans on credit cards come with an interest-free period of up to 90 days, making this credit option viable for credit card holders. In addition to that, the repayment of a loan on credit cards can be made in flexible instalments.
Features and Benefits of a Loan on Credit Card
Individuals will receive the loan amount based on the credit limit of their card, which also depends on repayment history, income and documentation. Also, it is essential to note that if an individual borrows an amount higher than the withdrawal limit of a credit card, against the unused amount of the card, the concerned financial institution might block using it further.
The card will be blocked until the amount of the loan decreases and the remaining loan balance becomes less than the credit withdrawal limit. However, different financial institutions offer comprehensive personal loans against credit card schemes.
Following are some of the essential features of a loan against a credit card:
- Individuals can avail of instant cash whenever required.
- One can apply it from anywhere and at any time.
- The loan amount is quickly transferred to the individual’s account without any requirement of many documents.
- Processing fee is minimal for the application for an instant loan on a credit card.
- With such credit options, individuals can convert their purchases into flexible monthly instalments.
- These types of loans do not include any guarantor or post-dated cheques
- Interest rates on loan on credit cards depend on the type of credit card owned by the applicant.
- Such credit facility is sanctioned for a maximum tenor of 24 months
Also Read: Credit Cards: Types, Advantages, Disadvantages, Features And More
Eligibility for Availing a Loan on Credit Card
Since such a credit option is unsecured and does not require any collateral, therefore it is offered to selected card holders. However, to be eligible to avail of a loan on credit cards, individuals need to fulfil the following conditions:
- To avail of a loan on credit cards, it is essential to possess a credit card account.
- Applicants need to have a good credit score and repayment history.
- Individuals with a high and stable income level apply for such loans and top-up loans against credit cards. In addition, with a higher income level, cardholders can transfer their card from silver to gold category and increase loan eligibility.
- Both new and existing customers can apply for a loan on credit cards.
Therefore, it is wise to check the credit score and repayment history carefully by visiting the website of the concerned financial institution.
How to Apply for a Loan on Credit Card?
Applying for a loan on credit cards is simple and straightforward. Here is the step-wise guide to applying for a loan against a credit card:
Step 1: Visit the official website of the preferred financial institution from which you wish to apply for the credit
Step 2: Fill in the loan application form along with necessary documents
Step 3: After submitting necessary documents, lenders will carefully verify the application form and documents
Step 4: After successful verification, financial lenders will disburse the loan amount to the applicant’s bank account or issue a demand draft for the amount
Documents Required to Avail for a Loan on Credit Card
To apply for a loan on credit cards, extensive documentation is not required. Individuals just need to have a credit card. So, while applying for the card, one needs to submit necessary documents to the concerned financial institution. Depending on these submitted documents and the relationship with the financial institution, lenders can sanction loans against credit cards.
Here are the documents required to apply for a loan on credit cards:
- KYC documents
- Address proof
- Office ID card and salary slip for last 3 months
- Attested ITR documents
- Passport size photographs
Final Word
To conclude, a loan on credit card is a type of personal loan pairing with additional benefits. However, the borrowers need to understand their withdrawal limit and the borrowing amount. If one is seeking an instant source of funds, then such options can be an ideal search.
Also Read: Latest Credit Card Interest Rates: How To Calculate & How does It Work?
FAQs about Loan on Credit Card
Ans: Yes, there is definitely a difference between interest levied on cards and loans against credit cards. Usually, financial institutions levy a higher interest rate on cash withdrawal on credit cards than on loans against credit cards.
Ans: Credit limit denotes the maximum amount that one can spend by using their card. the concerned financial institution determines the credit limit of the cardholder by considering details such as annual income, repayment capacity, credit history etc. Besides, the concerned lender revises the credit limit based on previous year’s record based on spending capacity and repayment.
Ans: There are certain factors that affect the eligibility for such credit options:
Poor credit score and repayment history
Insufficient financial standing and lower income level
Providing inauthentic documents
Existing liabilities
Age and work experience
Ans: As per experts, availing a loan on credit cards is effective for short-term debt. Moreover, since it is a kind of pre-approved loan extended based on credit card usage, credit score and history, it is a prompt and convenient borrowing method. Moreover, it can be considered a viable option to meet financial emergencies.
Ans: Individuals can avoid paying interest on credit card purchases by paying the overall balance in each billing cycle. Therefore, one needs to restrict their spending capacity every month to continue to enjoy the benefits of the card without paying substantial interest charges.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
