Loan against a Credit Card: Essential Information You Should Be Aware Of

A Loan Against Credit Card is a practical financial option for those who want urgent cash. With this loan, you can get quick access to cash without requiring extra paperwork by letting you borrow a fixed amount based on your credit limit. This blog will talk about the key features of Credit Card loans, ensuring you understand how they work, their perks, and what to think about before taking the loan.

Decoding a Loan Against Credit Card

A Loan Against Credit Card allows you to access instant funds using your Credit Card. You can get a pre-approved loan amount that is connected to your Credit Card limit without having to provide collateral to the bank. This kind of loan works similarly to a traditional loan, except it is connected to your Credit Card. Depending on the rules established by your bank or card issuer, it permits you to borrow a percentage of your Credit Card limit or even extend a loan amount over your card limit depending on the bank's policies.

Credit Card Loan Working Explained

The bank has already used Your Credit Card activity and credit limit to sanction your loan. No application is required, and the loan amount 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. You can repay the loan in monthly payments or EMIs over a certain period. Although it may vary depending on the bank and your credit history, Credit Card loans have lower interest rates than Credit Card balances.

Benefits of a Loan Against Credit Card

Here are some key advantages of opting for a Loan Against Credit Card:

• No Need For Collateral

When you take out a Credit Card loan, you don't have to provide any security like property or savings to qualify.

• Fast Access to Funds

Quick access to funds is a significant advantage of this loan since it is a pre-approved loan based on your Credit Card information, saving you the trouble of delayed approval processes and additional paperwork.

• Easy Repayment EMIs

You can easily repay your Credit Card loan by converting the amount into fixed EMIs. This method assists in managing your finances by enabling you to repay the loan in convenient installments over a period of time.

• Lower Interest Rates

Credit Card loans usually have lower interest rates than regular Credit Card payments. This makes them a more cost-effective option compared to carrying an unpaid balance.

• Flexible Tenures Available

Banks generally provide flexible repayment options for loans taken against Credit Cards. It can span from a month to a few years to accommodate your budget effectively.

How to Take Out a Loan With Your Credit Card?

• First and foremost, confirm your loan eligibility by getting in touch with your bank via channels such as your Internet Banking portal, mobile banking app, or customer support team. Here are the steps:

Through Internet Banking

1. Log in to Internet Banking.

2. Click on ‘Cards’ under ‘Cards & Loans’.

3. Scroll down to check the offer. Then, apply for the ‘Personal Loan on Credit Card’ offer.

Through Mobile Banking App

1. Log in to mobile banking apps like the iMobile app.

2. Click on ‘Cards / Forex / Paylater’ or the ‘My Cards’ option.

3. Scroll down to check the offer. Then, apply for the ‘Personal Loan on Credit Card’ offer.

4. Depending on your credit limit, choose the loan amount and payback period that work best for you.

5. The loan amount will be deposited directly into your bank account or, if necessary, credited to your card once you have chosen the conditions of the agreement and made all the necessary final adjustments.

6. Finally, the agreed amount for EMIs will be deducted from your bank account or Credit Card every month as per the loan conditions.

Things to Consider When Taking a Loan Against Credit Card

Here are some important factors to consider:

• Interest Rate

Even while the rate of interest for a Loan Against Credit Cards is lower than regular Credit Card payments, they may still be greater than rates offered on some Personal Loans available in the market. Before deciding which loan option to select, be sure to evaluate the interest rates and total expenses related to each.

• Impact on Credit Limit

When you take a loan against your Credit Card, the amount is usually deducted from your available credit limit. This reduces your spending capacity, so monitoring the lowered limit is important, especially for larger purchases.

• Prepayment Charges

Before the loan term is finalised, please note that certain banks might impose a fee if you choose to prepay, so be sure to inquire about any prepayment charges before making your decision.

• Late Payment Fees

Missing EMI payment deadlines can result in penalties and a decline in your credit score, and it's just like missing regular Credit Card payments. Therefore, it's helpful to have a plan in place to pay back the loan on time.

Quick Tips for Repaying Credit Card Loan

Here are some quick and effective tips to help you repay your Credit Card loan smoothly:

• Since the loan is tied to your credit limit, taking out more money than you can repay might affect how you use your Credit Card.

• Use the bank's EMI calculator to find the monthly payments that fit your financial limits to avoid fines. It's also useful to ensure you fulfil the EMI instalments on time.

• It's important to compare it to loan possibilities even though the interest rate may be lower than that of a Credit Card. Consider looking at other options, like a Personal Loan, if the rate seems too high.

Conclusion 

A Personal Loan Against Credit Card helps you get immediate access to funds without the hassle of time-consuming documentation like for traditional loans. This type of loan acts as a lifesaver during tough financial times. To keep your credit score good for future credit services, make sure you only take out loans that you can comfortably pay back. Unexpected costs may be managed without endangering your financial security if you understand the loan conditions and make wise use of them.