How to Take Loan from Credit Card

Tanushree Jaiswal Tanushree Jaiswal

Last Updated: 24th May 2024 - 04:16 pm

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Financial emergencies can arise unexpectedly and require immediate access to funds. In such situations, your credit card can be a valuable resource, enabling you to obtain a loan conveniently and quickly.

What Is a Loan Against a Credit Card? 

A loan against a credit card, also known as a credit card loan, is an unsecured personal loan that allows you to borrow money from your credit card's available credit limit. Credit card issuers offer this pre-approved facility to eligible customers, providing instant access to funds without the need for extensive documentation or collateral.

When you apply for a loan against your credit card, the approved loan amount is disbursed directly into your registered bank account or provided as a demand draft. This loan functions much like a personal loan, with the added convenience of being readily available through your existing credit card account.

Advantages Of A Loan Against Credit Card 

● Instant access to funds: Credit card loans provide quick access to funds, allowing you to address your financial needs promptly without lengthy application processes.
● No collateral required: Unlike secured loans, credit card loans do not require any collateral or security, making them an attractive option for those without assets to pledge.
● Minimal documentation: Since you are already a credit card holder, the documentation required for a credit card loan is minimal, streamlining the application process.
● Lower interest rates: Credit card loans often offer lower interest rates than cash advances or withdrawals made directly from your credit card.
● Convenient application: You can apply for a credit card loan from anywhere through your bank's online portal or by visiting a nearby branch.
● Flexible repayment: Credit card loans typically offer flexible repayment options, allowing you to choose a repayment plan that suits your financial situation.

Eligibility To Get A Loan Against Credit Card

To be eligible for a loan against your credit card, you must meet certain criteria set by your credit card issuer. Generally, the eligibility requirements include:
● Being an existing credit card holder with a good credit history and timely repayment record.
● A high credit limit and sufficient available credit on your credit card account.
● Maintaining a stable income and being in a higher income bracket.

Credit card issuers assess your creditworthiness and repayment capacity based on factors such as your credit score, income, and credit utilisation ratio. They may also consider your banking relationship and transaction patterns to determine eligibility.

Documents Required For Loan Against Credit Card 

One of the significant advantages of taking a loan against your credit card is the minimal documentation required. Since you are already a credit card holder, the credit card issuer has access to your personal and financial information from your initial credit card application.

However, in some cases, the credit card issuer may request additional documents to verify your identity, income, or address. These documents may include:

● Proof of identity (e.g., passport, driver's license, or national ID card)
● Proof of address (e.g., utility bills, bank statements, or rental agreements)
● Income proof (e.g., recent salary slips or income tax returns)
● Recent credit card statements

How To Apply For A Loan Against Credit Card 

● Step 1: Check your eligibility by contacting your credit card issuer or visiting their website to understand the criteria and terms and conditions.
● Step 2: Contact your credit card issuer's customer service or visit their nearest branch to inquire about the loan against credit card facility.
● Step 3: Complete your credit card issuer's application form, accurately providing the requested personal and financial details.
● Step 4: Submit the required documents, if any, such as identity proof, address proof, or income proof.
● Step 5: Once your application is approved, the loan amount will be disbursed to your registered bank account or provided as a demand draft.

Factors To Be Know Before Taking A Loan Against Credit Card 

● Top-up loan option: Some credit card issuers offer top-up loans, enabling existing borrowers with good repayment records to access additional funds.
● Loan tenure: Credit card loans typically offer flexible repayment tenures based on your credit limit, credit history, and the issuer's terms and conditions.
● Credit card usage: After taking a loan against your credit card, you may still be able to use the remaining available credit for transactions. However, it's crucial to consider the impact on your repayment obligations, as additional transactions may increase your overall debt burden.
● Loan default consequences: Failing to make timely loan repayments or missing credit card dues can result in late payment charges and negatively impact your credit score.
● Pre-closure charges: If you plan to repay the loan before the agreed-upon tenure, be aware that some credit card issuers may impose pre-closure charges or penalties.

Conclusion

A loan against your credit card can be a convenient and accessible option when you need financial help. A credit card loan can provide a valuable solution with minimal documentation requirements, instant access to funds, and flexible repayment options. However, it's essential to carefully consider the eligibility criteria, interest rates, and potential fees involved and ensure timely repayment to avoid any negative impact on your credit score and financial well-being.
 

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Frequently Asked Questions

What Is The Difference Between A Credit Card Loan And A Regular Credit Card Transaction? 

What Are The Interest Rates For Credit Card Loans?  

How Long Does It Take To Receive The Funds From A Credit Card Loan?  

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