A credit card loan comes with a pre-approved credit limit that the holder can use once per month. However, if you are in desperate need of money, most banks offer loans against credit cards. You can take out a loan against the credit limit assigned to you. The loan limit will be credited to your account once the bank approves your loan request. The bank has a specific credit card interest rate for loan repayment. You can repay this loan in Equated Monthly Installments (EMI) over a set period of time
The Benefits of a Credit Card Loan
Regarding credit card loans, various banks provide comprehensive loan schemes. Some of the benefits of a credit card loan are listed below.
- Because the majority of such loans are pre-approved, you do not need to submit any additional documentation, and the loan will be processed and disbursed quickly.
- With the EMI schemes provided by the issuers, you will be able to divide your large purchases into small, manageable payments.
- Some banks also provide loans against other banks’ credit cards via Balance Transfer on EMI, which allows you to transfer the outstanding balance on multiple credit cards to a single credit card and pay the EMI.
How Do I Get a Credit Card Loan?
Typically, credit card interest rates are offered on a pre-approval basis. When you become eligible for a loan on your credit card, your card issuer will notify you via SMS or email. The maximum loan amount available to you will also be communicated.
To apply for a credit card loan, follow these steps:
- Contact your bank’s customer service department.
- Log in to your Internet banking portal and submit your application online.
- If you have not received such communication and still wish to apply for a loan against your credit card, you may contact your bank’s customer service department and request it.
Pros And Cons Of Credit Card Loans
|Quick access to money||The interest rate is higher than that of a personal loan.|
|One of the most practical methods of borrowing||The credit card limit may be restricted.|
|There are no additional documents required.||Not all cardholders qualify.|
If you’re considering applying for a credit card, here are tips to help you approve your application.
- Avoid Submitting Too Many Credit Card Applications
Every credit card loan application lowers your credit score, so applying for multiple cards doesn’t look good to lenders. It is preferable to take your time finding the right card to apply for rather than wasting time applying for cards you are unlikely to be approved for.
- Understand What’s In Your Credit Reports
When you apply for a credit card, any errors on your credit report that have not been corrected may prevent you from being approved. If you notice an error, file a dispute with the credit bureau to have it corrected.
- Pay All Of Your Bills On Time
Paying your bills on time every month builds your credit history and can improve your credit score. This includes credit cards, student loans, mortgages, rent, and utility payments. Consider setting up automatic payments, at the very least for the minimum payment due each month, to avoid missing a payment and incurring late-payment penalties.
- Keep An Eye On Your Credit Utilization
Lenders consider your credit utilization rate, which is the total amount of credit you are using in comparison to the total amount of credit available to you. Maintaining a total credit utilization rate of less than 30% can help your credit score.
- Create A Diverse Credit Portfolio
Having a diverse credit history and a variety of cards and loans — will increase your appeal as a borrower. When you consistently make on-time payments across the board, it demonstrates that you can handle various types of credit and increases your chances of being deemed a reliable applicant.
- Create Credit Early On
Applicants with a longer credit history are more likely to be approved. Begin building credit as soon as possible (but not too soon), and be cautious when closing other cards, especially if you’ve had them for a long time. If you have several open accounts in good standing, your credit score will rise.
Although it may not be as simple as it appears, following all of the above tips will help you get a credit card loan approved quickly. In most cases, a credit card loan is a necessity, but we advise you not to apply for one in haste. Instead, do your research and apply to the lender whose eligibility and credit card interest requirements best match yours. Furthermore, read all of the terms and conditions, as well as charges such as processing fees, pre-payment fees, and foreclosure fees, in advance to avoid any unpleasant surprises later.
Read also: Easy Instant Credit Card Options Available Online