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We all know about personal loans and the reasons why we may require one. However, many of us are not aware that there are various kinds of personal loans apart from the direct ones. Loan against credit cards is one such type of personal loan which allows you to borrow money against your credit card.
A credit card is an electronic card which allows you to make payments in excess of your usual spending means. You enter into an agreement with a bank which makes these payments on your behalf and you have to repay the bank on a pre-determined date. Normally, the banks do not charge interest on the card if you repay on or before the due date, but if you fail to make the payment, you will have to pay interest.
Through a credit card, you can make an online or offline payment, for amount permitted within your credit limit. However, many a time there is an urgent requirement of money. In these cases, you may want to go for cash withdrawal on your credit card. But hold on, there is another way to meet this urgency. You can opt for loan against Credit card. Cash withdrawal against credit card may solve your immediate problem, but the quantum of money received will be limited and the rate of interest will be high. Hence, we recommend you not to opt for this. Loan against credit card charges an interest rate similar to that of personal loans and you may be eligible for a larger loan amount.
Low interest rate, a higher amount of loan and quick disbursal are some of the factors that give an edge to loan against credit card. Once your loan amount is approved, you will receive it either through a demand draft issued by a bank or through an ECS transfer to your account.
About Loan Against Credit Card
The biggest advantage of loan against credit card is the fact that you do not have to go for additional documentation or collaterals to avail loan on credit cards.
Please note that loan against credit card is not offered to all customers who have a credit card. This loan is only available for someone with a good credit history. If you have a good credit history, it is possible that your credit card gets upgraded from silver to gold or platinum and you can get access to better loan facility against the credit card.
In India, personal loans have a higher interest rate than that of a car loan or a home loan. The interest rates range from 12% to 24% p.a. Other factors that influence the interest rates are the category of card i.e. Gold, Silver or Platinum and your credit history. To enjoy good terms of loan against credit cards and a favourable interest rate, it is highly important that you maintain a good credit history throughout. Apart from interest rates, there is also a nominal amount of processing fee that is charged.
Usually, most banks offer loan against credit card to both old and new customers. For being eligible for availing loan against Credit cards, you must fulfil the following criteria :
The documents required when you apply for loan against credit card are the same that you would normally require while applying for a credit card. These include :
1. What is loan against credit cards?
Loan against credit card is an unsecured personal loan that can be availed if you have a credit card. You can get instant cash in emergency situations with zero documentation process.
2. What is a credit limit?
A credit limit is the maximum amount that you can spend through your credit card. This limit is determined by the banks based on your credit history, repayment track record, spending habits, and annual income. The banks do a periodic review of these factors from time to time and may revise your credit limit if things are found favourable.
3. What is good credit history and why is it important?
A good credit history means the track record of an individual about how well he has handled his previous loans, the repayment record, his ability to handle multiple loans etc. If you have a good credit history, you can seek favourable terms on your credit card and avail a Loan against credit card at lower interest rates.
4. What is the difference between Loan against credit card and cash withdrawal against credit card?
Cash withdrawal against credit card also gives you instant cash but the quantum of loan is less than that of loan against credit card and the rate of interest is relatively higher. It can be as high as 36% p.a. The limit of cash withdrawal against credit card is pre-determined by the bank.
5. Are there any other charges levied apart from the interest rates?
Apart from the interest rates, banks also charge a nominal processing fee. The processing fee varies across banks.
6. How should I apply for loan against credit card?
You can apply for a loan against credit card through net banking, telephonic call or by simply visiting your nearest bank branch.
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