Applying for a loan can be a tiresome task as it requires consulting various financiers to choose one with a lower rate of interest. You need to find a loan that offers you the required credit limit and a flexible period of payment.
An urgent need for money might put anyone in a situation where they have to take a loan at a higher interest rate, thereby paying more money. If you are in a situation where you need readily available funds without a lot of hassle, a credit card can prove to be a saviour.
What Is A Credit Card Loan?
A credit card undoubtedly offers a whole bunch of uses and benefits. In dire financial situations, your credit card can be very helpful in getting you a loan on the credit limit extended to you by the credit card provider.
Considering how easy it would be for people to default on the loan, impeccable credit history is an important prerequisite for credit card loans. In addition, the cardholder should have no defaults on bill payments and EMIs.
In an urgent requirement of cash, you can reach out to the bank or financier whose credit card facilities you have been using and check the requirements for a loan. Upon submitting the application, the lender will add the limit to the account, and you can pay back the lender in equated monthly instalments.
Features Of Loans On Credit Cards
Most banks nowadays are extending the loan facilities on credit cards as it helps them retain their customers. Some important features of credit card loans are listed below:
Credit card loans are pre-approved by the financier, and there is no requirement of any documentation. You can simply reach out to the bank and ask for the loan facilities available on the credit card.
Credit card loans are collateral-free and do not require any security from the borrower. You can avail the loan facility from the lender without risking your property or other assets.
The credit availed from the loan has to be paid back to the lender in equated monthly instalments. To be clear, you can choose the tenure of payment, which varies from 12 months to 60 months as per the amount of loan availed.
Higher Interest Rate
While it is easier to get a credit card loan than a personal loan, one should always check the rate of interest being charged by the financial institution. There are multiple factors on which the interest rate depends and the higher the corpus of loan, the higher will be the interest rate charged by the lender.
Credit card loans have a particular limit up to which a financial banker will offer the loan amount. If the loan amount you need exceeds the limited capacity, you might want to check other options.
No Credit Check
Loan processing completely depends upon a person’s credit history and the repayment of the loans in the past. Getting loans without credit check does not only save you the hassle of credit checks but is also a simple way of getting quick cash.
Eligibility Criteria For Credit Card Loans
Before you go any further, it’s a good idea to check if you are eligible for a credit card loan. In essence, an unsecured line of credit requires the following conditions to be met:
Credit Repayment Pattern
Maintaining a repayment pattern is important to secure the loan as the financial banker will check for any defaults in the previous payments. If you have defaulted on paying the EMI, then it is highly likely that the loan won’t get approved.
A cardholder with an excellent credit history won’t face any rejection from the loan authorities. A credit history involves the loans, advances and other credits secured by the applicant from the multiple sources. Any default on the repayment of debts will result in the rejection of the loan application.
Factors To Consider Before Getting A Credit Card Loan
If you are planning to apply for a loan against your credit card, keep the following factors in mind.
Many financiers provide a top-up on loans against the credit cards if you have a clean credit history. Late payments on credit card loans can result in losing the chance to get extra money.
You might have a question: will defaulting on my loan payment affect my credit score? The short answer is: yes. Failure to pay your credit on time can severely hamper the creditworthiness of the borrower.
Bear in mind that defaulting on a credit card loan is not the same as defaulting on the credit card payment. If you fail to honour the terms and conditions of the line of credit, your subsequent loan applications may get rejected.
You can easily close the loan account by paying back the financier without any intimation. However, it is important to check for any pre-closure charges that might be levied by the lender. The charges will depend upon the due loan amount and the tenure of payment.
Every financier levies a processing fee which needs to be paid either in the first instalment or before the start of the loan. The fee varies as per the financial institution and usually lies between 1-5% of the loan amount.
Generally speaking, financiers provide a flexible repayment tenure to the borrowers. It depends upon the loan amount and can vary between 1-5 years. You should always check with the creditor about the schedule of payments during the tenure.
Having a credit card can resolve the challenges of instant finance requirements, and in case of emergencies, it might be the only way out. If you are looking to borrow against your credit card, it’s best to borrow from a trusted and reliable lender who sets reasonable parameters.
Be sure to repay any outstanding debts, as failure to do so will reflect badly on your credit score and history.