There are several aspects of taking a loan on a credit card, which you must understand before taking such a loan. Let us discuss these further.
Features of credit card loans:
There are some things you should know about credit card loan eligibility before availing one.
Credit card loans are typically pre-approved loans which are offered by banks to credit card customers. You needn’t apply for a credit card loan. Also you don’t have to submit any documents to avail the loan.
A credit card loan can be availed almost instantly, because it is pre-approved and therefore is disbursed quicker than a loan which requires approval, like a personal loan. No need to undergo the application and approval process for this loan.
Offered to new/existing customers
These loans may be offered by banks to not only existing customers, but also new customers.
How much funds you can avail with a loan against a credit card will depend on your credit limit. This amount can vary from card to card, and from lender to lender.
Ideal for small purchases
These loans are most suited for when you require a small amount of cash to take care of an expense, such as buying a new mobile phone.
No restriction on end use
Similar to a personal loan, there are no restrictions on what you use the funds for. However, the funds must not be used for illegal activities like gambling, etc.
Interest rates charged on loans against credit cards may be at par, or sometimes higher than the interest rates charged on personal loan. This can vary from lender to lender.
Repayment tenure of a credit card loan can also vary from lender to lender, and also based on the type of credit card you have. For instance, ICICI allows a repayment tenure of up to 60 months on their loan on credit card, while Bajaj Finserv offers a repayment tenure of up to 90 days on its Bajaj Finserv RBL Bank credit card.
Also, many banks will allow you to pay for a purchase in EMIs, to help lower the burden of making a larger payment in one shot.
Credit card loans may also include a processing fee, like a personal loan does. For example, Bajaj Finserv charges a 2.5% processing fee on their credit card loan.
Eligibility for credit card loan
Whether or not you are eligible for a credit card loan, and if so, the amount that you will be eligible to get, will ultimately depend on a number of factors. The most important of these include your credit card limit, your transaction history/pattern, your credit history, and your repayment ability.
While personal loans may be the go-to choice for taking care of personal expenses, credit card loans are also a popular option, when the need is for a smaller amount of funds.
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