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What is a loan against Credit Card

Introduction

A Loan Against Credit Card is a convenient financial product that allows credit cardholders to access instant funds by using their credit card as collateral. It is a quick & easy way to obtain cash in times of financial emergencies without having to go through the cumbersome process of applying for a traditional loan. This type of loan is typically available to credit cardholders who have a good credit score and a high credit limit. The loan amount is usually a percentage of the available credit limit on the card & is charged at a predetermined interest rate.

In this article, we will explore the various features of a Loan Against Credit Card including its benefits, eligibility criteria & application process to help you make an informed decision about whether it is the right option for your financial needs.

What is a loan against Credit Card ? 

Credit card loans are individual loans. If you’re using a credit card, you can quickly apply for a quick loan using your credit card. In contrast to a personal loan, a credit card loan is not required for documents. A personal loan typically requires just a couple of records to show proof of your ability. Credit card loans are unsecured, similar to same-day cash loans.

The loan amount can be repaid to you as demand drafts or the direct transfer of funds directly to your banking account. Because of the lower interest rate on loans against a credit card instead of cash withdrawals made with credit cards, taking out a loan from your credit card could be financially viable. This is why many choose to take out a loan against credit cards. Credit card loan is also referred to as pre-approved and pre-qualified credit.

A loan against Credit Card Eligibility

You may be eligible for an advance on your credit card when you meet the following requirements:

  • Typically, banks provide loans against credit cards to current and new customers. However, banks such as HDFC offer it to current HDFC Credit Card holders only.
    • In addition, you should be able to establish a credit history. Banks can offer loans on credit cards, provided you have an excellent track record of repayment and a strong credit standing.
    • Someone with a high and higher income can be eligible for this loan and additional loans backed by a credit card. An increase in revenue will allow you to transfer your gold to a silver credit card and increase your loan’s approval.
  • It is unnecessary to provide documentation to obtain the loan using a credit card. Since to be able to get a credit card loan, it is essential to possess a credit card. When you apply for a credit card, you must submit all of the required documentation to the bank. Based on the documents you’ve already submitted and the relationship you established between your banking institution, your bank can authorize a loan against the credit card. Typically, banks ask to see the following documentation when applying for credit cards:
  • A photocopy of your proof of address like a recent utility bill, telephone bill, driving licence and passport, etc. (Any of the above documents).
  • An identification document like a PAN card, identification card for voters, driver’s licence or passport, etc. (Any or all of the above documents).
  • A few recent passport-size photographs.
  • Three months’ final salary forms for salaried employees.
  • A copy of your ID card – only for salaried employees.
  • Self-employed persons must present an attested copy of the most recent ITR (income tax returns) and a copy of their PAN card.

How do you get a loan for personal use using a credit card?

Applying for an individual loan with a credit card is easy. It is possible to apply for personal loans with a credit card online through the lender’s official website, which you want to benefit from. You must submit the application form and the required documents. The bank will check the information provided by you, and if they’re confirmed to be correct, then the bank will release the money to the account at the bank.

A loan against Credit Card Interest Rates

Interest rates on personal loans in India start at 12 per cent and rise to 20%, slightly more than interest rates that are charged for other loans, like car loans and home loans. A credit card loan is also a type of personal loan. Therefore, the interest charged for loans against credit cards is a bit more expensive. For instance, HSBC Bank charges between 15% and 21% on interest charged on loan credit cards, which are agonists. Additionally, the rate of interest charged on loans against credit cards differs based on the type of credit card (gold or platinum, silver or) you own and your credit score. So, keeping a positive credit score is vital since banks will look at your credit history before giving a specific interest rate for your loan.

Benefits and features of loans against Credit Card

  • Get attractive and lower interest rates compared to the fees on cash withdrawals with a credit card.
  • No documentation is required.
  • You can apply on the internet or simply by making a phone call.
  • You can enjoy fast processing and immediate payment after approval.
  • You can use it from any location anytime.
  • A credit card loan is a kind of unsecured personal loan.
  • The processing fee is low.
  • You may repay the loan over monthly instalments. Monthly EMIs will be charged to your credit/debit card each month.
  • Credit card loans are usually approved for a maximum period of 24 months.
  • The interest rates on loans against a credit card can vary depending on the borrower’s credit card.
  • You can enjoy flexible loan terms.

Questions on Loans against Credit Card

What is the term “credit limit? A: Credit limit refers to the highest amount you can spend using credit cards. The credit limit for your credit card is based on information like your annual earnings, credit history, and the capacity to repay. The bank also adjusts the credit limit according to the previous year’s records regarding spending and repayment. They could increase the credit limit when you make sure to pay all credit card bills punctually and maintain a positive rapport with your banking institution. However, if you make late or delay your payments often and don’t have good relations with your bank, they may reduce your credit limit downwards.

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