A loan against a credit card is basically a type of personal loan. Any person who has a credit card is eligible to apply for a loan against their credit card. Taking a loan against a credit card is a simple process, as it does not require any documentation, unlike a personal loan. A loan against a credit card is a kind of unsecured loan similar to cash withdrawal using your credit card. It is a viable option as the interest rate charged is lower than the interest charged on cash withdrawals using the credit card. The loan amount is seamlessly disbursed in the form of a demand draft or through a direct transfer to your bank account. These are the reasons why a loan against a credit card is popular among credit cardholders. Moreover, such loans are also known as pre-qualified loans or pre-approved loans.
People often get confused between cash withdrawal using a credit card and a loan against credit card. Through loans against credit cards, they think that the bank would increase their credit card limit, and they can easily withdraw cash through credit cards. This is a common misconception since banks, in practice, offer you a loan against your existing credit card. A loan against a credit card is a quick, document-free process best suited for your immediate cash requirements. Furthermore, cash withdrawals on credit cards have higher interest rates, whereas banks often charge a lower interest rate on loans against credit cards.
Eligibility criteria to avail loans against credit cards
Generally, banks offer such loans preferably to old customers rather than new customers. The eligibility criteria to avail of these loans include the following conditions.
- It is compulsory to have a credit card to avail loan against it.
- Your credit history must be strong, and your credit limit must be high. Credit cards are mostly issued to customers who have had a good credit repayment record. An exhaustive credit assessment is done before approving the loan to ensure the customer can pay back the loan within the stipulated time.
- Customers in high-income groups are also eligible to apply for loans against credit cards. With the increase in income level, you can upgrade your credit limit, eventually increasing the loan amount eligibility.
To have a detailed eligibility check to secure a loan against your credit card, you can visit your nearest bank branch or apply through net banking. The loan amount is generally higher than the card’s cash withdrawal limit. Furthermore, the interest charged on the credit card is called the Annual Percentage Rate (APR). There is no difference between the credit card interest rate and the APR of a credit card.
Steps to apply for a loan against a credit card
You need to follow these steps to apply for a loan against your credit card:
- Log onto the official website of your credit card company or the bank from which you plan to apply for a loan against your credit card.
- You will be prompted to fill in all your basic details in a form. You need to fill out the form and submit it. If any document is required, you will be asked to submit it along with the form.
- After applying, the bank or credit card company looks into your application form and verifies your eligibility.
- Once the verification is completed, the bank will transfer the loan amount to your linked bank account. If you wish to get a demand draft, the bank will issue a demand draft furnishing the loan amount.
- If you prefer to apply for the loan through the offline procedure, you need to visit the nearest branch and submit the application form providing all the required details.
Advantages of taking loans against credit cards
When you apply for a loan against a credit card, you can benefit from the following advantages.
- One of the most significant advantages is that you do not have to arrange for any additional documents or collateral to avail of this loan, unlike other loans.
- You can repay the loan using affordable EMI options based on your convenience. The EMI facility helps you to plan your financial obligations on time.
- The interest paid on a loan against a credit card is comparable to the interest on personal loans.
- These days, almost all banks provide credit cards, so applying for a loan against a credit card is very convenient in case of urgent cash requirements.
- The loan tenures are flexible and can be extended to a maximum period of 24 months.
The loan against a credit card is not offered to all customers who possess a credit card. This loan is readily available for customers who have a good credit history. With a good credit history, you can seamlessly upgrade your credit card from silver to gold or platinum levels and have access to an improved loan facility against the credit card.
If you are planning to apply for a credit card, you can choose the Bajaj Finserv RBL Bank SuperCard, which provides you with several industry-first features like instant card approval, hassle-free services, and interest-free cash withdrawal for up to 50 days. Using this SuperCard, you can get loans with nominal interest rates based on the available credit limit to take care of your emergency cash requirements.