A credit card is an excellent funding option for items you want to purchase now but pay later. This financial tool offers a line of credit to make the necessary expenses and the luxury of paying for them later. However, you must repay the credit card issuer before the due date to avoid hefty interest charges.
Sometimes, you might need more than a few months to repay the borrowed amount. That is when you must check if you are eligible for a loan on a credit card. It is a Personal Loan that can be borrowed against your card’s credit limit. Let’s explore more about this credit option and how to apply for one.
Understanding the Concept of Loan on Credit Card
A loan on a credit card is a pre-approved loan that permits credit cardholders the accessibility to fulfill their short-term financial needs. It is a convenient facility that card providers provide based on the customer’s credit card usage, creditworthiness, and repayment history.
If you are already a customer of the company or lending institution, it is a quick and hassle-free option. It provides instant funding access without any collateral, security, documentation, or unnecessary formalities.
Features and Benefits of a Loan on Credit Card
Let’s look at the features and benefits of a loan on a credit card:
- Instant Access to Funds: Quick funding access is one of the most significant advantages of borrowing a loan on a credit card. Since it is a pre-approved loan that card providers sanction for their trusted customers, they do not demand extensive documentation and lengthy approval processes. Just check if you are eligible and then apply credit card loan.
- No Collateral Required: Unlike traditional loan products, loans on credit cards are unsecured. It means you don’t need to pledge collateral or provide security against the loan.
- Flexible Repayment Options: Institutions providing loans on credit cards usually offer flexible repayment terms, allowing borrowers to repay the loan in a suitable tenure. For instance, you can borrow a loan on a credit card for repayment tenure of up to 60 months.
- Direct Transfer: You receive the sanctioned loan amount directly in your bank account, no matter which bank account. Leading institutions like ICICI Bank can disburse the loan amount in any bank account apart from itself.
- Low Interest Rates: Low interest rates on these loans make them the most economically viable funding solutions.
- 100% Digital Procedure: The application procedure for credit card loans is 100% digital. You can complete the process online from the comfort of your home. It does not require any branch visits or paperwork. It means you can apply for this loan type anytime from anywhere.
- Minimal Processing Fee: As an existing customer of the company, you have the advantage of a minimal processing fee. For instance, ICICI Bank’s processing fee for a credit card loan is as low as 1%, one of the lowest in the market.
Eligibility Conditions and Documentation Requirements for a Loan on Credit Card
If you own a credit card and need money to cover an urgent expense, consider applying for a loan on the card rather than paying a high interest rate. However, you must fulfill certain eligibility and documentation requirements to qualify. These include the following:
- A good credit score
- A consistent track record of timely bill payments
- A reliable history of credit card spends
If you fulfill these conditions, the final decision for loan approval depends on the bank’s internal policies. As far as the documentation is concerned, you don’t need to worry about that. Since a personal loan on a credit card is a pre-approved loan product, it does not require any documentation.
Steps to Take a Loan on a Credit Card
These are the general steps to follow when applying for a loan on a credit card:
- The first step is to ensure your credit card company offers loans on credit cards. You can check the company’s website or contact its customer care center to find the correct information.
- Before applying for the loan, carefully read the terms and conditions and ensure they suit your needs and capacity. The most important things to consider include the interest rate, repayment terms, processing charges, additional charges, etc.
- Decide the loan amount you need and if it is available to borrow within your credit limit.
- A significant due amount on the credit card may impact the loan amount you may borrow.
- After reviewing the terms and conditions and confirming the credit limit, you can check if a pre-approved loan offer against the card is available for you.
- After verifying your details, the company will approve your loan and credit the funds in a savings account of any bank you want.
- Once you receive the loan amount, ensure you repay it on time according to the predetermined repayment schedule. Missing the payments attracts additional charges, negatively impacting your credit score.
Through Internet Banking
- Log in to your net banking account.
- Click ‘Cards’ under ‘Cards and Loans’.
- Scroll down to check if a pre-approved loan offer is available. If yes, click on ‘Apply’ and provide the necessary details.
Through Bank’s Mobile App
- Download and log in to the app.
- Click ‘Cards & Forex’ or ‘My Cards’.
- Scroll down to check if a pre-approved loan offer is available. If yes, click on ‘Apply’ and provide the necessary details.
Conclusion
A loan on a credit card is a type of personal loan you may borrow against your credit card’s existing credit limit. It can be an instant source of funds for urgent situations without collateral requirements and end-use restrictions.
Rather than repaying the amount with the next credit card bill, you can distribute the expense over the tenure of up to 60 months and repay conveniently. However, maintain a strong repayment history to qualify for this loan type and make careful financial decisions.
