Taking a loan against a credit card can be a convenient and quick way to access funds in times of urgent financial need. In India, many credit card issuers offer this facility to their cardholders, providing a hassle-free alternative to traditional personal loans.
In this article, we will explore the process of taking a loan against a credit card in India, its benefits, and important considerations to keep in mind.
What is a loan against a credit card?
A loan against a credit card, also referred to as a credit card loan or pre-approved loan, is a convenient facility that permits credit cardholders to access a short-term loan from their credit card company.
The loan amount is usually pre-approved and determined based on the individual's credit card usage, repayment track record, and creditworthiness. This quick and hassle-free financing option provides instant access to funds without requiring any collateral, making it an attractive choice for meeting urgent financial needs.
What are the benefits of taking a loan against a credit card?
Instant access to funds:One of the significant advantages of a credit card loan is the quick access to funds. Since the loan amount is pre-approved, there is no need to go through lengthy approval processes.
No collateral required: Unlike traditional loans, credit card loans are unsecured, which means that there is no need to pledge any collateral or security to avail of the loan.
Flexible repayment options: Credit card companies usually offer flexible repayment tenure options, allowing cardholders to choose a suitable tenure that aligns with their financial capacity.
Easier eligibility criteria:The loan against a credit card generally has more relaxed eligibility criteria compared to other types of loans. It is based on the cardholder's credit history and the credit limit on the card.
How to take a loan against a credit card?
Step 1: The first step is to check if your credit card issuer offers a loan against your credit card. This information can be found on the credit card company's website or by contacting their customer support.
Step 2: Before availing of the loan, carefully read and understand the terms and conditions, including the interest rate, processing fees, repayment tenure, and any other charges.
Step 3:Ensure that the loan amount is within your available credit limit. If you have a significant outstanding balance on your credit card, it may affect the loan amount available to you.
Step 4:Once you have reviewed the terms and conditions and confirmed the available credit limit, you can apply for the loan through the credit card company's website or by contacting their customer service.
Step 5: Some credit card companies may require additional documents for verification purposes. These could include proof of income, address, and identity.
Step 6: Upon successful verification, the loan will be approved, and the funds will be credited to your bank account or credited to your credit card account, depending on the credit card issuer's policy.
Step 7: Ensure timely repayment of the loan as per the agreed-upon repayment schedule. Late payments may attract additional charges and negatively impact your credit score.
A loan against a credit card can be a valuable financial tool for those in need of quick funds. However, it is essential to exercise caution and borrow responsibly. Before taking a credit card loan, carefully review the terms and conditions, consider the interest rates and repayment tenure, and assess your ability to repay the loan on time.
