The number of people using credit cards is increasing day by day, as it is one of the easiest ways to fulfil one’s needs and requirements when they are out of money. Credit cards are also a great help when it comes to the emergency situation, from booking an expensive flight ticket to pay urgent medical bills, all these kinds of expenses can be bored by a credit card. However, apart from all these, there is one more benefit of using a credit card, which many of us don’t know, and that is- one can avail a Loan Against credit card know as credit card loans or pre-approved loans.
What is a Credit Card Loan?
Loan against credit card is a kind of unsecured loan. If one is using a credit card, he/she can easily apply for a loan against his/her card. A loan against credit card takes only a few minutes to get approved as it is a kind of pre-approved loans. Unlike a personal loan, a credit card loan does not require any documentation. As a personal loan normally needs a few documents in support of your eligibility but a credit card loan is a paperless loan, as the customer is an already existing customer to the bank and the banks already have all the required documents with them which they took while issuing the credit card. Since the loan against credit card doesn’t need any documentation, it is an quickest and easiest option to raise one’s fund/finance to cover their financial needs. Loan against credit card is an unsecured loan same as a Personal loan.
What are the Features of Loans against Credit Card?
- Get instant cash whenever required.
- Lower interest rates than cash withdrawal from credit card
- No documents are required
- Can apply for it online.
- Fast processing
- Quick disbursal
- No collateral or guarantor is required
- Low processing fees
- Repayment through EMIs
- Maximum tenure of 24 months.
- Enjoy flexible loan tenures.
Who are Eligible for Credit Card Loans?
You are eligible to get a loan against your credit card if you fulfill the following conditions:
Generally, banks provide a credit card loan for both existing and new customers. However, some banks as in HDFC offers loan against a credit card only for existing HDFC Credit Card holders.
- Having a credit card is a must to get an easy credit card loans.
- To have a good credit history is also a must to avail this credit card loan/online loan.
- A person with high-income can also apply for this loan as well as top up loans against a credit card. With high-income lenders feel more secure as borrowers with high income have more capacity to repay the loan as compared to a borrower with a low income.
What Documents are Required for a Credit Card Loan?
No documents are required to apply and avail a loan against a credit card as to apply for a loan against a credit card, one needs to have a credit card, which already submits to the bank while applying for a credit card. Based on the documents which one has already submitted and the lender/bank, the bank can sanction a loan against your credit card.
However, Documents required for a credit card are following-
- Documents for Identity proof – Voter ID card/ Aadhar card/ Pan card
- Documents for Address proof- Electricity bill/ Water bill/ Aadhar card/Ration card/ driving license
- 3 months bank statement
- Salary Slip
- It returns documents in case of self-employed
Things to Know about Loan against Credit Cards
Credit cards are issued with a credit limit. The maximum amount which can be borrowed through a credit card at once is within the limit of the credit card, including the interest. This limit of the card varies from bank to bank, at the discretion of the lender, and if a borrower has a good standing he/she is able to request an increase evaluation. And if a borrower doesn’t have a strong pattern of use, the lender may opt to decrease the limit, which can reduce the maximum possible loan amount.
Annual Interest Rate
One of the most important elements of a credit card loan is the annual percentage of interest that one needs to pay. Generally, credit card companies charge 24% to 36% of the annual interest on the use of the credit card. The percentage of interest is almost same as the credit card loans. But it may vary with the customer’s eligibility such as CIBIL and how he/she has used his credit card and its repayments in past. The annual percentage rate is a variable rate that can vary and range from a zero percent promotional rate meaning no interest charge to as much as 32% p.a.
Repayment of a Credit Card Loan
Repayment of the credit card loan is usually done through a monthly installment, which details the amount of money borrowed i.e. the principal amount along with the interest charges and fees. Usually, there is a minimum amount that must be paid each month, although the borrower has the option to pay more. Many lenders also have online repayment options which makes it easy for the borrowers.