How a credit card loan works and when it’s better than a personal loan

Interest rate and fees vary

Credit card loans will carry less interest compared to regular credit card rollovers (up to 40% annum). You can anticipate interest rates of between 12% and 18% annum. There might be a small processing fee (1-2%), and some banks offer zero-interest EMIs in offers with limited periods and merchants' association.

You can pay in EMIs

Repayment is done in the form of EMIs auto-debited from your card statement every month. Tenors usually start at 6 months and go up to 48 months. Some banks allow foreclosure in a few months without cost, but read the terms and conditions before availing. Impact on your credit score

As long as you are making payments on time, a credit card loan can improve your credit score. But failing to pay or using high credit can lower your score. You should keep your total credit utilization below 30% of the card limit for a good score.

When it makes sense

A credit card loan is also helpful, particularly when you suddenly require funds and do not wish to go through the hassles of a personal loan application. It suits well for future needs such as medical needs, wedding, or big purchases especially when you are reasonably confident of repayment within the EMI horizon.