Loan Against Credit Card

Loan against credit card

It is always irksome to pay bundles of cash for a heavy purchase and even one can’t roam everywhere with a suitcase to carry cash for expenses. However, if you possess a credit card you probably have done away with the fret of carrying cash. One also doesn’t need to refill his/her bank account regularly in order to spend sums. A credit card allows a decent spending limit to customers, which in no way is related to your savings or current account balance. But what makes this financial instrument more adorable is the fact that it can also be used to avail loans.

What is a loan against credit card and how it can be availed?

Loans availed against credit card are actually pre-approved loans and require no collateral and documentation. However, it mustn't be confused with cash withdrawals using credit cards. Cash withdrawal via credit cards usually comes with a hefty of interest or surcharge, whereas, a loan against credit card carries less interest. A loan approved against credit card is offered either as a demand draft or is transferred directly to the borrower's bank account. Such loans are desired when the credit limit of the card is not enough to meet any urgency or when a person is in a catastrophic situation. Having said that, there are a few things which must be known before opting for this loan.

• Despite being less than the interest charged on cash withdrawals, the interest levied on a loan against credit card is usually more than regular loans.
• Most of the banks also charge a processing fee to grant the loan.
• The amount sanctioned depends prominently on an individual’s credit score, which in turn, depends on the financial history of the borrower. To say in other words, it is not necessary that every credit card holder can avail loan against his/her card.

Benefits of a loan availed against credit card

Loans against credit cards have some exclusive benefits. If you have a credit card and a decent credit score, you can enjoy these benefits without much muddling.

• Loan against credit card carries less interest rate compared to withdrawal surcharge of the same card.
• Being a pre-approved loan, one doesn’t need to go through any hectic documentation process. This makes it the best option to be considered in case of financial emergency.
• This type of loan is normally approved with a maximum tenure of 24 months and carries a negligible processing fee.
• One doesn’t need to go to the bank for the application. Instead, this loan can be processed online or via a phone call.

Availing a loan against credit card has bonus aids along with some caution. It is an unsecured loan and should be taken into consideration only in case of an emergency. However, a number of attractive benefits are making this financial instrument popular day by day.