Credit Card Loan: loan against a credit card is a preapproved loan, you can avail loan on your credit card based on your credit score. Find its eligibility, benefits & the banks that offer the same at Moneycontrol.
Know how you can avail a loan against a credit card, its features and benefits, and the banks that offer the same.
Today, credit cards are used right from buying flight tickets to paying your electricity bills. And if you have an international credit card, chances are that you will swipe it on that international vacation. While these features are exciting, one additional feature that credit cards offer is the ability to avail a loan on the card. These loans are over your allotted credit limit and are similar to the loan you may apply through a bank.
What are the features of a loan on credit card?
Each bank will have a unique set of features when it comes to providing you a loan against your credit card. However, these features are common to all of them:
- Since a loan against a credit card is a preapproved feature, you do not have to submit any documentation
- The bank usually has an EMI scheme, which is good, as you don’t have to worry about paying anything in lumpsum. Instead, you can focus on monthly instalments
- Sometimes, you can avail a loan from a bank using another bank’s credit card by transferring the outstanding balance to a single card, and then pay the EMI. This method is called balance transfer- You can apply for a loan amount that is greater than the credit limit that you have on your credit card
Benefits of a Loan Against a credit card
- One of the biggest advantages of a loan against a credit card is that these loans are preapproved. This means that you can avail the loan without any paperwork, and the amount will automatically be credited into your bank account
- With a loan against your credit card, you now have the advantage of making expensive purchases through equated monthly instalments (EMIs)
- You are given the option of transferring the balance outstanding from other cards to a single card and pay the entire amount in EMIs
- Easier to avail a loan against a credit card as they are preapproved loans- No guarantor or post-dated cheque required
Am I eligible for a loan against a credit card?
Although a loan against a credit card is a preapproved loan, you need to meet the following criteria
- You need to be an owner of a credit card. If you are not, you cannot apply for a loan
- You need to pay your credit card bills on time i.e. a good credit score is required
- You need to have regular income. Higher the income, better the chance of getting a preapproved loan against your credit card- You need to be either an existing customer or a new customer of a bank. However, some banks only give a preapproved loan to existing customers i.e. you need to hold a bank account for a given period (depending on the bank), before you are eligible to avail a loan against a credit card.
How do I avail a loan against credit card?
You can avail a loan against your credit card in two ways
In case you are applying online, you can either log into your bank's mobile app or the desktop app.
Once you are on the site, click on the credit card tab, if you have a credit card.
Here, you click on the loan against card tab and enter your requirements, as well as the tenure you will take to pay the loan back.If you are applying offline, you need to SMS your requirement to the designated number your bank gives in its customer care page. Or you can call the bank's toll-free number.
Top banks offering loan against credit card
HDFC Bank: HDFC Bank offers competitive interest rates on the EMIs you have to pay on a loan against a credit card. The disbursement happens almost immediately after you avail the loan and can be paid between one and five years.
ICICI Bank: ICICI Bank offers a specialised scheme called 'Cash-in Select' to its customers, based on their credit score. Customers can avail loans up to Rs.5 lakhs with multiple tenures ranging up to 36 months.
Kotak Mahindra Bank: Kotak Mahindra Bank: Through Kotak Mahindra Bank's loan on credit card scheme, you can avail instant cash at competitive interest rates. This loan on credit card is easy to apply, hassle free and is also disbursed quickly.
IndusInd Bank: IndusInd bank offers loans of up to Rs 5 lakh against credit cards and you can repay the loan between a period of six months and 36 months. The loan is easily available and will be credited to your savings account as soon as the bank approves your loan.
Standard Chartered Bank: You can avail a loan up to Rs 5 lakh with interest rates starting at 1.17% per month and flexible tenures ranging up to 60 months.HSBC: HSBC offers a loan against credit card on its phone. Customers can convert their costly expenses into EMIs with low interest rates.
How does a loan against a credit card work?
The basic concept of the credit card is that you are buying a product on credit. Based on your credit limit, you can avail a loan on your credit card while paying a certain interest rate.
Can everyone who owns a credit card get a loan against it?
This is not true. You will get a loan based on your credit score i.e. how frequently you pay your bills and whether you have not defaulted any other payment.
What is the drawback of availing a loan against a credit card?
Compared to a regular personal loan, you will be paying a higher rate of interest and if you fail to pay the EMI on time, then you may have to pay higher penalties
What are the documents required to apply for a loan against a credit card?
One of the biggest advantages of a loan against a credit card is that it’s preapproved and requires no collateral. Furthermore, since it’s a preapproved loan, you do not have to submit any documents while applying for it.
What can affect my loan against credit card eligibility?
If your credit score is poor, then chances of getting a loan against your card may be low. However, there are factors that may improve your chances of getting a loan against credit card. Improved income levels over the years can have a positive effect on your eligibility.
How is loan against credit card different from cash withdrawal using a card
Cash withdrawal limit amounts are lower than the loan against your credit card. Also, you may have to pay a higher rate of interest if you withdraw cash from an ATM machine, rather than avail a loan against your card.
Is it possible to convert all the purchases to EMI?
No. Usually banks have a cap on the purchase amount that can be converted to EMIs. Also, there are certain goods such as jewellery that you cannot buy using EMIs
Is there a fee you pay for a loan against a credit card?
You will be charged a certain amount as processing fee. Also, you might be levied a pre-payment penalty if you decide to foreclose the loan.
What is the meaning of balance transfer?
You can convert the balance outstanding on other cards to a single credit card and pay it through easy instalments.