A loan against Credit Card is an instant personal loan that you can get against your total credit limit. But unlike other personal loans, you don’t need to show any documents. In other regular loans, you have to prove your eligibility by showing some documents and it takes some time too. But in a Loan against Credit Card, you can get a loan almost instantly without any documentation.
What is a loan against a credit card?
The loan against a credit card is a pre-approved personal loan that you can get against your credit limit almost instantly, without any paperwork. Most of the cardholder thinks that the card providers increase your credit limit when you get a loan, but this is not the case. You will get the loan against your total existing credit limit.
This kind of loan is the best option for those who need instant cash to deal with some emergency, and when your withdrawal limit is over. This is better than cash withdrawal you will have to pay a higher interest rate when you withdraw cash besides. That’s why this type of loan is much beneficial than cash withdrawal.
How can one get a loan against a credit card?
Getting a loan against a credit card is very simple, you can get a loan almost instantly with some simple steps. There are two methods the first one is an online method and the second one is the offline method.
The online method is very simple, you just have to visit the website of the card provider, here you can submit your application with some necessary details, and if everything is right, your loan amount will be credited to your bank account.
If you are not comfortable with the online method, there is also an offline method for you. You just have to visit the nearby branch of your card provider, here you can submit your application with some necessary documents, you will also get complete assistance from them.
Who can apply?
Every credit card holder can apply for a loan against credit, but to get the loan he/she needs to meet some basic eligibility criteria.
- Most of the card providers offer this kind of loan to any customers but some card providers like HDFC bank offers this loan only to the old customers.
- The applicant should have a good credit score and a good credit history. And since it is an unsecured loan, having a good credit score is necessary.
- A customer with a higher income is the most eligible for such loans. If you have a higher source of income, you can upgrade your credit to a higher category. And it increases the loan amount you can get.
- And last but not least the applicant should be a credit cardholder.
Also, you can check your eligibility for the loan in several ways, including – phone banking, net banking, or just by vising the branch. The maximum loan amount you can get depends on your income.
A loan against a credit card is not free of cost. The interest rate normally ranges between 12% to 20%. That is a bit higher than other types of loans. The interest rate depends on the card type, your credit history, etc.
If your taken loan amount is higher than your cash withdrawal limit, the card provider may block your cash withdrawal facility. You can withdraw cash from your card again as soon as you pay back the loan.
Benefits of Loan against credit card
The loan against a credit card is meant for emergencies. There are several benefits of this facility that makes it the best option for emergencies –
- It is an instant loan, you can get this loan instantly, whenever you need it, even you don’t need to provide any documents.
- It charges a lower interest rate than cash withdrawal, and you can get a higher amount of loan through the loan against the card, than cash withdrawal. You will also be charged a lower processing fee.
- You can apply for the loan online or with just a phone call. It offers fast processing and quick approval of the loan.
- You can pay back the loan amount in monthly installments. You can get a tenure of a maximum of 24 months.
Cons of loan against credit card
Although there are several benefits of a loan against a credit card, there are some drawbacks too. The cons of loan against credit card are discussed below –
- This type of loan offers a higher interest rate than other personal loans. That makes it a much expensive loan option.
- If you apply for a much higher loan amount, the card provider may block your credit limit until you pay back the loan amount in full.
- Every cardholder is not eligible for this kind of loan, your eligibility depends on several things.
The loan against a credit card is only best for emergencies, it is a much expensive loan option. So, only when you don’t have any other option available, you can go for this.