A loan on credit card is a type of pre-approved personal loan that can be acquired when credit card users are in urgent need of cash. If an individual owns a credit card that offers such card-linked loans, he/she can easily apply for one without having to submit any additional documents. The loan amount can be used for any financial requirement without any restrictions whatsoever.
The loan amount extended by the concerned financial institution to the credit card holder is typically through a direct bank transfer. Depending on the nature of this pre-approved financing facility, this instant loan could either be linked to the card’s credit limit or a separate loan. However, these loans usually have higher interest rates than other loan options like personal loans or gold loans.
Following are some of the essential features of a loan against a credit card:
HDFC Bank offers two types of credit card loans to its credit card customers – Insta Loans and Jumbo Loans. Insta Loans are linked to the card’s credit limit and the maximum loan amount is usually capped at 80% of the available credit limit balance. Jumbo Loans, on the other hand, are not linked to the card’s credit limit and could be even more than the limit. However, both the loans come with a tenure range of 12 months to 60 months, with current interest rates starting at 15% p.a. Eligible card holders can get funds instantly through any of these loan facilities without any additional paperwork.
ICICI Bank offers Personal Loan on Credit Card to select ICICI Bank credit card customers based on their spends, transaction pattern and repayment history. The maximum loan amount could be ₹20 lakh for tenures up to 60 months and interest rates between 14.99% and 15.99%. The loan comes with minimal documentation requirements and can be availed instantly online.
Standard Chartered Bank offers Loan on Credit Card up to ₹10 lakh to its pre-approved credit card customers. The loans can be availed quickly starting from 11.88% p.a. with tenures from 12 months to 60 months.
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:
Pre-approved credit card-linked loans usually do not require any additional paperwork. However, in some cases, a few additional documents might be required depending on the card issuer’s terms and conditions. These could include:
Loans on credit cards are usually pre-approved in nature. Hence, in order to get such a loan, here are the steps to follow:
If you’re in urgent need of cash, you might want to consider going for a loan against a credit card if you’re eligible for one. These could be availed of quickly with minimal documentation requirements. While doing so, ensure you minimise your loan amount as much as possible because of the high interest rates involved. For bigger requirements, it might be a better idea to go for a personal loan or a gold loan for relatively lower rates.
That said, if your credit score is low, you might not be eligible for a credit card, and thus, a loan against credit card.
Loan on credit cards could be a good fit for urgent short-term financial needs because they could be availed of quickly often involving zero paperwork. However, keep in mind that these are expensive loans often linked to the card’s credit limit. So, read the terms and conditions carefully before taking such a loan, and ensure you repay it in full in time to avoid accumulation of debt due to interest penalties and a damaged credit score. Lastly, consider your other credit card spends before choosing a loan linked to the card credit limit as that would be locked to the extent of the loan balance leaving you with lower funds to meet other card spends.
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.
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.
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
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.
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.
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.
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