Loan Against Credit Card: Advantages and How to Apply

Credit cards are helpful financial tools that give you access to quick financing in an emergency when you lack enough capital. Apart from helping pay for shopping or travelling experiences, they can also provide financial freedom when you require a substantial amount of funds. By opting for a loan against a credit card, you can avoid the lengthy process of loan application and waiting for approval.


The loan amount sanctioned will depend upon your existing and utilised credit limit and repayment history. You can easily apply for a credit card loan via online options, making it a convenient option during urgent moments. Read below to learn more about a loan against a credit card and associated benefits. 

What is a Credit Card Loan?

A credit card loan is an unsecured loan where you borrow money from your credit card company against your credit card. No collateral is required for this. Instead of using the credit limit directly, you can take a loan and repay it through flexible EMIs. The loan amount depends on your available credit limit. 

Advantages of Credit Card Loan

Here are some pros of getting a credit card loan if you have an existing card.  


Instant Approval 

You can quickly get approval on your credit card loan based on your unused credit card limit. Instant approval happens since the lender already has the necessary documents and considers you eligible. 


Flexible Repayment

You can choose a flexible monthly repayment tenure as per your income and requirements.


No Need for Collateral

The card issuer provides you with this loan based on your unused credit limit. This is why it does not require any additional collateral.


Loan Amount Depends on Your Credit Usage

A higher credit limit may be provided to you if you use the credit card responsibly and have a good credit score. 


Less Documentation

Lenders provide this loan on a credit card, and they already have your documentation, requiring minimal additional documentation, if any.

Eligibility Criteria for a Credit Card Loan 

To apply for a credit card loan, the eligibility criteria are relatively straightforward. Here are a few common points to note about its criteria:


Credit Usage

A major eligibility factor is the Credit Utilisation Ratio (CUR), which is a percentage of the total credit limit used on your credit card. The bank provides a higher credit amount if you have a lower CUR percentage as it indicates a responsible user.


Credit Score

A bank or financial institution checks your credit score before providing you with a credit card loan. They require you to meet a specific score threshold to ensure you showcase responsible borrowing and spending behaviour.


Responsible Repayment Record

Lenders may offer this loan based on your repayment history and if you've kept up with previous payments. In case of missed payments in the past, you may not get approval as there is a higher risk of defaults. 

Application Process of a Credit Card Loan

You must check out these aspects to get approval on your loan application:

Check your eligibility based on the lender’s criteria

Review the applicable terms, fees, and charges

Submit your loan application for quick processing and instant approval

Receive funds directly in your account after approval

Disadvantages of Credit Card Loans

This facility also has certain drawbacks despite all of its benefits. Here are some disadvantages to consider:

High interest rates if not repaid on time

Can negatively impact your credit score if you miss payments

Additional late payment charges

Limited loan amount based on your credit limit

Risk of accumulating debt with high interest rates and penalties on overdue payments

Potential for overspending due to easy access to credit

Short repayment tenure may strain finances

May affect your credit utilisation ratio, lowering your credit score

Not ideal for large loan amounts compared to other loan options

Factors to Consider Before Taking a Credit Card Loan

Before you take a loan against your credit card, here are some factors you must deliberate on:


Flexible Tenures

You can choose a repayment tenure based on your credit limit and the lender's terms. 


Loan Foreclosure Charges

You may have to pay some additional charges if you want to foreclose your loan before tenure ends. 


Loan Defaulting

Failing to repay instalments can hurt your credit score and incur late payment charges.


Other Options

If your lender charges a high interest rate or if you can find another quick option, choose the most affordable option. 


Knowing these essential pointers, you can explore a loan against your credit card in times of need. If you wish to get a credit card with a convenient borrowing option for the future along with other perks, consider the One Credit Card. 


With the OneCard App, you can easily track and manage your expenses and earn guaranteed 5X reward points on your top two spending categories every month. This card comes with deals across a range of categories like shopping, dining, travel, entertainment, etc. Furthermore, its OneCash feature provides easy access to funds whenever you need them. Visit the website or download the app to apply now!

Post a Comment

0 Comments