Know About Credit Card Loans and How They Work

by RaVee
Credit card loan

As consumerism takes off, India has witnessed a surge in credit card loans in the past decade. Issuers extend you this loan based on your card usage and repayment history. While a pre-approved credit card loan provides quick access to funds, it can lead you into debt if not managed responsibly. 

By knowing how they work and the things you need to take into account, you can make the credit card bill payment on time and avoid financial stress. 

What are Credit Card Loans?

Here’s a brief overview of these credit schemes:

  • A loan against credit cards is a pre-approved loan facility that doesn’t require extensive documentation and has an easy application process.
  • It is an unsecured loan, which means you don’t have to put up an asset as collateral.
  • Before disbursing the loan, credit card companies evaluate several factors, including repayment history, transactions, and spending patterns.

How Do Credit Card Loans Work?

Credit card loans provide quick access to funds during emergencies through an easy application. These work like an instant personal loan. Here’s a quick look into it: 

  • Once you apply for the loan, the issuer will approve the request 
  • The loan amount will be instantly transferred to your account 
  • These loans come with a flexible repayment period 
  • The EMI due will be added to your monthly credit card statement until the tenure ends

Who Can Get a Credit Card Loan?

Firstly, you need to own a suitable card. However, remember that not everyone who owns a credit card can get a loan. Check the eligibility requirements set by the issuer to know whether you can apply.

These criteria may vary depending on the lender and your card. Generally, issuers provide this facility to those having:

What to Consider When Getting a Credit Card Loan

A credit card loan can provide you with a quick inflow of cash in times of emergencies. However, take these aspects into account before you decide to apply:

Processing and Disbursal Time

  • A shorter processing time would result in quicker access to funds
  • Check and compare the time taken by the issuer to transfer the loan amount 

Loan Amount

  • The loan amount will depend on your credit limit
  • Some may offer an amount that’s low, equal to, or higher than your limit 
  • Evaluate the amount you need and apply accordingly to ensure easy repayment

Repayment Tenure

  • The tenure can range between a few months to 5 years
  • Longer repayment duration can lead to higher overall interest charges
  • The EMI amount will also be added to your monthly bill, so you need to choose accordingly

Interest Rate

  • Since these loans have higher interest rates than traditional options, consider whether it is worth paying extra charges
  • The credit card interest rates depend on various factors, like your credit score, income, card repayment history, and credit card type

Other Fees

  • Factor in the charges levied by the credit card companies on these loans
  • Check processing fees, prepayment or foreclosure charges, and more 
  • These charges can even go up to 5% of the loan amount
  • Choose an option that’s most cost-effective

Benefits of Getting a Credit Card Loan

Here are some of the benefits that you can enjoy with loans against credit cards:

Instant Access

As mentioned earlier, the most significant benefit of these loans is their quick availability. 

Some issuers may even provide you with a loan within a few hours of applying.  

Lower Interest Rates

Many credit card companies offer competitive interest rates on loans against credit cards. Choosing a cost-effective option will help you get affordable funding without any hassles. 

Flexible Tenure

Loans against credit cards come with flexible repayment options ranging between 3 months to 5 years. This allows you to choose a tenure that best aligns with your financial needs and circumstances. 

No Collateral Requirement

Unlike traditional loans, you don’t have to offer an asset as security against the money you borrow. This ensures quicker and risk-free access to credit.

For your unforeseen expenses, loans against credit cards allow you to access quick funds. To get a card that provides quick access to funds through an entirely digital onboarding process, get the One Credit Card. 

You can get approval for this premium metal card within 5 minutes and enjoy convenience with its powerful mobile application. Get 5X rewards, a wide variety of credit card bill payment offers and discounts with no joining and annual fees. Apply now to reap these benefits and more.