Emergencies have a way of catching us off guard. Some are mild, whereas some are severe. The latter often makes it tough for us to find a solution immediately. In times like these, turning to a loan on a credit card can help address the issue at hand.
Borrowing a loan against your credit card is a very convenient way to access emergency funds in times of urgency. Banks have made it possible to borrow these loans online by making borrowing processes smooth. Let’s take a look at how you can secure a personal loan using your credit card.
Getting Familiar with Credit Card Loans
It is very important to understand the concept of a loan on a credit card before actually considering doing it.
What is a Credit Card Loan?
A loan on a credit card is a loan lent by your credit card issuer, depending on your payment track record and judicious use of credit. A pre-approved amount, this loan type is lent based on available credit, in addition to how smartly has the credit card been used until that point in time. A loan on a credit card is perfectly suited for borrowers keen on avoiding the procedural formalities associated with traditional personal loans, including paperwork and meeting set eligibility criteria.
Criteria for Eligibility for Credit Card Loans
The first step towards availing a loan on a credit card is understanding whether you qualify for this type of loan.
Who Is Eligible?
Banks usually offer credit card loans to customers with a history of judicious use of credit and a track record of making timely payments. Typically, regular use of the credit card, spending within the allotted credit limit and making timely payments are factors taken into consideration by the bank while approving a loan of such type. Your bank will review your transaction history on the card to determine if you qualify for a loan and whether you meet their requirements or not. Accordingly, you might receive pre-approved offers.
Applying with Banks
Some banks lend loans on credit cards issued by other banks, after reviewing your transaction history, use of credit and payment record. It is advised that you apply for a loan on a credit card only with the bank which issued you the card, as it can speed up both the application and approval processes.
Documents Needed for Loan on Credit Card
Once your eligibility for the loan is confirmed, the next step is to get the paperwork in order, as per the bank’s policies:
Minimal Paperwork
If you’re seeking a loan from the bank that issued your credit card, there may not be a need for document submission. These loans are often pre-approved, based on your credit card usage and payment track record.
Documentation for Loans from Banks
If your credit card is from another bank, then chances are you will have to provide proof of identification, address verification and income details, for processing the loan request. Even if applying online, filling out a loan application form may be necessary when dealing with another bank. Taking out a loan on your credit card offers a process, which is a major benefit.
Checking Interest Rates and Repayment Tenures
Always check the interest rates and repayment terms before deciding to take a loan on your credit card.
Competitive Interest Rates
The interest rates for these loans are typically competitive. These often vary depending on factors like your credit history and the amount borrowed. People with a high credit score and good repayment records usually qualify for lower interest rates, making the loan more cost-effective.
Flexible Repayment Options
These loans come with a flexible repayment tenure of up to 60 months. This flexibility allows you to select a tenure that aligns with your present financial situation, making repayments manageable without causing strain.
Disbursal of Loan Amount
Knowing how the loan amount will be disbursed can help you plan once your loan is approved. Below are the following ways in which banks disburse loans on credit cards:
1.Direct Transfer to Savings Account
If you have a savings account with the bank from which you are borrowing the loan amount, then it will be directly disbursed to your account.
2.Other Disbursal Methods
For individuals without an account in the bank, disbursal is typically done through methods, such as National Electronic Funds Transfer (NEFT) or Demand Draft (DD). After submitting your application, it may take between 3 to 4 business days for the loan to get approved and disbursed. If the disbursement is made via a demand draft, then the timeline could extend to two weeks. Planning can help ensure that you have access to the funds when you require them most.
How to Request for a Loan on Credit Card
Requesting a loan on your credit card can be completed online or offline.
Online Application Procedure
To apply online, you can visit the credit card issuer’s website. Follow the application steps. Some banks even offer options for applying via SMS or contacting their customer service team. The online application route is typically faster and more convenient. It can be done from your home or workplace.
Offline Application Procedure
Those preferring face-to-face interactions can apply for the loan by visiting your bank’s branch. The staff at that particular branch will assist you through the application steps, ensuring all required documents and details are in place.
Advantages of a Loan on Credit Card
There are several benefits of opting for a loan on a credit card. These are:
- Speed and Convenience: One advantage lies in processing, making these loans convenient. With paperwork and rapid disbursement, they prove to be a handy resource, during emergencies.
- Competitive Interest Rates and Flexible Repayment Options: The attractive interest rates and flexible repayment plans make them cost-effective for individuals seeking urgent financial assistance.
- No Need for Collateral: Another perk is that these loans do not necessitate collateral, widening their accessibility to a bigger audience. The entire procedure is straightforward. Given that many banks offer pre-approved loans, the likelihood of approval is significantly higher.
Guidelines for Managing A Loan on a Credit Card
While opting for a credit card loan can be highly convenient, it is crucial to handle it with care. Here’s why:
- Borrow Wisely: Ensure you only borrow an amount you can comfortably repay. Borrowing in excess can lead to strain and challenges in meeting repayment deadlines.
- Timely Repayments: Secondly, ensure timely payment of your instalments. Missing payments may result in fines. It adversely affects your credit rating.
- Budgeting: Do not forget to keep an eye on your expenses and stick to an amount easily repayable.
Conclusion
A loan on your credit card is a resource that offers quick access to funds, convenience and flexibility. Whether you’re dealing with a situation which has you planning a purchase or you are just in need of some extra money, this loan can give you the financial support you need quickly and conveniently. By knowing the ins and outs of the process, meeting the eligibility requirements, and handling the loan responsibly, you can take advantage of this option without jeopardising your well-being. Remember, the key to making the most of this opportunity is borrowing sensibly and ensuring timely repayments.
