Availing a loan against your credit card is the fastest way of meeting emergency financial needs and addressing a short-term monetary crunch. This loan works like a personal loan, except that it offers quicker approval from your issuer, usually without you having to submit any additional documents. All you need is an operational credit card and you are all set to leverage your finances.
A personal loan on credit card is usually acquired against your credit card. However, reputed issuers offer you the benefit of a loan as one of the features of your credit card. For instance, with the Bajaj Finserv RBL SuperCard, all you need to do is apply for a conversion of your credit limit into a loan. What’s more, a Bajaj Finserv Loan Against Credit Card offers an interest-free period for up to 90 days. For an easy and hassle-free application, you can apply for a credit card loan on the SuperCard mobile app and avoid visiting a branch or the hassles of lengthy paperwork.
As always, it is best to know all about a financial product before applying for it. So, here are 5 things to know about a loan against a credit card to make the most of it.
Default on loan against credit card is considered as a loan default
Defaulting on a loan against a credit card and defaulting on a credit card bill have different impacts on your credit score. When you default on a credit card loan, it is treated as loan default and thus, severely impacts your credit score. In contrast, a credit card bill default has a comparatively lower impact on your score.
The interest rate on credit card transactions remains unchanged
Lenders set a predetermined limit up to which you can apply for a credit card loan. Say, your credit card allows you to avail a loan of up to 70% of your credit limit. On this limit, issuers charge an interest rate similar to a personal loan rate. In contrast, the interest rate on the remaining 30% remains unchanged. Therefore, if you make a credit card transaction using the 30% of your limit, and aren’t able to clear your bill within the due date, you will be charged the same interest rate as you were being charged as a regular credit card user.
Prepayment on your loan against credit card is allowed
Just like in the case of a regular loan, you can also prepay your loan against credit card. This way, you can save on the interest applicable on the prepaid amount. However, issuers may charge certain pre-payment fees. So, be sure to ask your issuer about it before availing a credit card loan.
Processing fees are applicable on a personal loan on credit card
Depending on the issuer, you will have to pay a processing fee of up to 5% when you avail a loan against a credit card. So, before applying for a credit card, shop around to find an issuer charging lower fees. The Bajaj Finserv RBL SuperCard charges processing fees as low as 2.5%.
Choose your EMIs and tenor to suit your convenience
Most issuers allow you to choose a convenient repayment tenor of your choice. Generally, the tenor ranges up to 24 months, but your issuer may also offer tenor options higher than 24 months that varies according to the customer profile. Also, by choosing the tenor, you can also choose affordable EMIs.
With these takeaways, you can make an informed decision and use a credit card loan diligently. If you wish to use this clever way to leverage your finances, start by applying for a SuperCard and also enjoy other features like interest-free ATM withdrawals, a loan against your credit limit, a handsome rewards system, and conversion of purchases into EMIs. Further, you can gain from robust security for all your purchases and easy management via the RBL MyCard app. All you need to do is check your pre-approved credit card offer to enjoy instant approval!
