What is the Loan Against Credit Card?
A Credit Card is a credit issued by a financial institution that allows cardholders to borrow funds to pay for goods and services. The Credit Card issuer will set a limit for the card depending upon the income and the creditworthiness of the applicant. The Credit Card is issued with a condition imposed that the cardholder has to pay back the borrowed money, plus interest, as well as any additional agreed upon charges.
Generally, an interest- free period is provided by the banks which ranges from 30 days to 50 days depending upon the card issuing bank. If the amount mentioned in the credit statement is not paid within the interest-free period, then interest is charged on the balance outstanding which varies from bank to bank.
A revolving facility is also provided wherein the minimum amount payable will be stipulated and the balance will be carried over to the next billing date. An interest will be charged on the carried over balance which differs from bank to bank. If the minimum amount is not paid within the stipulated date, a late fee will also be charged apart from the interest, which also varies from bank to bank.
A vast majority of businesses allow the customer to make purchases with Credit Cards. This has made the payment vide Credit Card the most popular payment methodology for buying consumer goods and services.
A Loan Against Credit Card is similar to an Unsecured Personal Loan which can be used for any purpose. Unlike Personal Loans, Credit Card loans are pre-approved loans which will be disbursed immediately on placing a request. If you are holding a Credit Card and are in urgent need of funds, you can apply for an instant Loan Against Credit Card. Credit Card loans do not involve an elaborate process and are approved and disbursed within no time.
Often, Credit Cardholders mistake the Loan Against Credit Card to cash withdrawal limit. The cash withdrawal limit is fixed for every card to enable the availability of cash in times of need, but a Loan Against Credit Card is an Unsecured Personal Loan that will be made available in addition to the card limit. The charges on the cash withdrawal using the Credit Card are very high whereas the interest applied on the Loan Against Credit Card is much lower.
The loan will be disbursed in the form of a demand draft or by way of credit to your savings account. The bank will block the cash withdrawal limit if the loan against the Credit Card is higher than the cash withdrawal limit. However, once the outstanding loan balance of Loan Against Credit Card falls below the cash withdrawal limit, it will be restored.
Who Can Take Loan Against Credit Card?
Any existing Credit Cardholder or a new Credit Cardholder with a good income and good track record can avail Loan Against Credit Card. It is also necessary that the payment of earlier Credit Card dues have been made promptly on or before the due date.
For a Credit Cardholder with a good track record, Personal Loan against the Credit Card is generally a pre-approved one. A loan can be availed instantly since no documentation is involved.
Benefits of Taking Loan Against Credit Card
Benefits of taking a Loan Against Credit Card are numerous. Some of the benefits are as mentioned below:
- You can get instant cash at the time of urgent need
- The interest charged is much lower compared to the interest on cash withdrawals on Credit Card.
- The disbursement is faster since no documentation is required
- You can apply for the loan online or make a request through a phone call
- The loan can be accessed from anywhere across the country
- High-value purchases can be converted to equated monthly instalment (EMI) with a Credit Card loan. The EMI will be billed to your card every month.
- Loan Against Credit Card is similar to an unsecured personal and does not need collateral or guarantor.
- The processing charge levied is comparatively low
- The interest rate on the Loan Against Credit Card depends on the type of Credit Card held by the cardholder.
- Flexible repayment option with a maximum repayment period of 5 years
Eligibility for Loan Against Credit Card
The eligibility criteria for Loan Against Credit Card are as follows:
- Loan Against Credit Card is given to both existing as well as new customers. However, some banks limit the Loan Against Credit Card facility to their existing cardholders.
- Holding a Credit Card is a must for availing a Loan Against Credit Card
- The repayment of earlier Credit Card dues must have been made promptly on or before due dates.
- You should also have a high credit score (700 or above) to be eligible for the loan
- If your income level has improved, you can apply for the Loan Against Credit Card as well as top-up loans against Credit Card.
- An improved income level will help to change the category of the card to a higher level. If you have a silver card it can be changed to a gold category which will increase your loan eligibility.
- Before applying for the Credit Card loan, it is better to check your eligibility to understand the quantum of loan that will be provided.
- The quantum of Loan Against Credit Card will be generally higher than the cash withdrawal limit
- The cash withdrawal limit will be blocked until the outstanding balance of Loan Against Credit Card comes below the cash withdrawal limit.
How to Check Your Eligibility for Loan Against Credit Card?
You can check your eligibility for Loan Against Credit Card in the following ways:
- Log in to the Net-Banking and click on Cards. Choose the Credit Card option. Go for the Transaction option and from there you can choose the Credit Card Loan.
- You can call the Phone Banking line the concerned bank at any time
- If you are eligible for the loan and not registered for Do Not Call (DND) or National Do Not Call (NDND), you will receive a call from the sales executive of the concerned bank. The eligible amount, interest rate and other loan details will be explained to you and the loan will be booked immediately since there is no need for any documentation.
- If you are eligible for the loan and not registered for DND or NDND, you will receive an SMS with the eligible amount, the tenure and the interest rate. If you are interested to apply after accepting the terms and conditions listed on the website of the concerned bank, send the short code mentioned in the SMS.
Banks Offering Loan Against Credit Card
Some of the top banks who offer Loan Against Credit Card are as listed below:
HDFC Bank Loan Against Credit Card
- HDFC Bank offers Loan Against Credit Card only to its existing cardholders
- The loan amount will be approved and disbursed in minutes
- Loan Against Credit Card is a pre-approved loan and does not require any documentation
- HDFC offers the following four types of Loan Against Credit Card:
Insta Loan: You can avail this loan for instant funds requirement. EMI of the loan will be included in the immediate next billing cycle and will be a part of the minimum amount due appearing in the monthly billing statement. The rate of interest charged on this loan will be 1.25% p.m. The repayment period ranges from 12 months to 60 months and you can choose the tenure as per your EMI affordability.
Insta Jumbo Loan: The loan amount will be over and above the Credit Card limit. In this case, the Credit Card limit will not be blocked. A separate card number will be given for the jumbo account and you will receive a separate statement for the loan account. The EMI will be billed in the loan account statement in the immediate next billing cycle. The billing date and payment due date will be the same as the Credit Card account. The rate of interest charged will be 1.25% p.m. The repayment tenure will be between 12 months to 60 months and you can choose the tenure that suits you the best. An Auto Pay will be activated for Insta jumbo loan within 7 days of loan booking. The EMI will be debited to the savings account of the cardholder on the due date.
Balance Transfer of EMI: Pay the outstanding balance on non-HDFC Bank Credit Card or any loan by converting it to EMI with HDFC Bank Credit Card. The loan amount will be blocked against your Credit Card limit. The repayment tenure ranges from 12 months to 60 months and the interest charged will be 1.10% p.m.
Smart EMI: Convert every purchase on HDFC Credit Card except jewellery into EMI. The repayment tenure ranges from 9 months to 36 months and the rate of interest charged will be 1.50% p.m.
All the above loans will be approved within seconds as there is no documentation involved.
ICIC Bank Loan Against Credit Card
- ICICI bank offers loan against the Credit Card to existing Credit Cardholders as well as new customers at an attractive rate of interest.
- The loan is based on the Credit Card spends, payment history and transaction pattern
- It is basically an Unsecured Personal Loan with no requirement for collateral security or guarantor.
- The repayment period will range from 12 months to 60 months
- The EMI will be included in the immediate monthly billing statement and will appear along with the minimum amount stipulated in the card statement.
- GST will be applicable on the loan EMI amount
Axis Bank Loan Against Credit Card
- Axis bank offers Loan Against Credit Card to existing Credit Cardholders
- It is an Unsecured Personal Loan offered at an interest ranging from 12.60% to 22.20%. The interest rate is arrived at based on various factors.
- The loan will be disbursed within seconds to the savings account of the cardholder since there is no documentation involved.
- Multiple tenure options are available to suit your budget
- GST is applicable to the EMI amount
- Processing charge at 1.5% of the loan amount or 500 (whichever is lower) will be collected
- Pre-closure charge at 3% of the outstanding loan balance or 300 (whichever is higher) is applicable.
Key Features and Terms for Loan Against Credit Card
The key features and terms for Loan Against Credit Card are as follows:
- A Loan Against Credit Card is offered to existing Credit Cardholders of the bank depending on the Credit Card spend, payment history and transaction pattern.
- Quick turnaround time. A loan will be disbursed within seconds.
- A Loan Against Credit Card is an Unsecured Personal Loan which requires no collateral and guarantors.
- Some banks limit the quantum of the loan to the Credit Card limit whereas some banks offer loan amount beyond the credit limit.
- No documentation required
- Attractive interest rates ranging from 12.60% to 22.20%. The rate of interest applicable depends on the type of card held by the borrower and other factors like credit score, loan quantum and repayment capacity.
- Conversion of purchases on Credit Card into EMI is also a part of the loan on Credit Card facility
- EMI on loan will be calculated at the rate specified on call on a monthly reducing balance
- Multiple tenure options ranging from 12 months to 60 months are available to suit your payment budget.
- EMI along with GST will be included in the monthly statement starting from the immediate billing cycle date and will be a part of the minimum amount due mentioned in your Credit Card statement.
- Some of the banks charge a processing fee and pre-closure charge based on their internal guidelines.
- The loan will be credited instantly to the savings account of the cardholder. If the cardholder does not have a savings account with the respective bank then the amount will be transferred by way of NEFT/RTGS. For transfer through NEFT/RTGS, the cardholder has to provide the bank details like IFSC code and account number or provide a cancelled cheque of the bank account.
- Disbursement of loan by way of Demand Draft can also be opted for. For this, the turnaround time will be as long as 11 working days.
- You can apply for the loan online through the official website of the bank or through net banking. You can also apply for the loan through phone banking or by visiting the nearest branch.
Documents Required for Loan Against Credit Card
No documents required for a Loan Against Credit Card as the required documents will have been submitted while applying for the Credit Card.
Frequently Asked Questions - Loan Against Credit Card
What is a credit limit?
A credit limit is the spending limit fixed on your Credit Card based on your annual income, credit history, and repayment capacity. If you pay the Credit Card bills promptly and you maintain a good relationship, the bank may increase your credit limit depending on your income and spending pattern.
What is a Loan Against a Credit Card?
A Loan Against Credit Card is an Unsecured Personal loan offered by banks to resolve immediate financial requirements of the cardholder.
What are the eligibility criteria for a Loan Against Credit Card?
The eligibility criteria for a Loan Against Credit Card are:
- Having a Credit Card is a basic requirement
- The earlier Credit Card dues should have been paid promptly on or before the due date
- A good credit score and good income with good repayment capacity are mandatory
Is there any processing charge for a loan on Credit Card?
Yes. A nominal processing charge will be collected.
What are the documents required to apply for a Loan Against Credit Card?
No documents are required to apply for a Loan Against Credit Card. It is a zero-documentation process.
How to apply for a Loan Against Credit Card?
You can apply for a Loan Against Credit Card online through net banking. You can also apply for a loan through phone banking or by visiting the nearest branch.
What is the mode of disbursement for a Loan Against Credit Card?
The loan will be credited directly into the savings bank account of the cardholder. If the cardholder does not have a savings account with the respective bank, the funds will be transferred through NEFT/RTGS to the savings account with any other bank. For this, a cancelled cheque of the bank account has to be provided.
Is there any difference between the interest rates charged on cash withdrawals on Credit Card and a Loan Against Credit Card?
Yes, there is a difference in the interest rates charged. Banks normally charge a higher rate of interest on cash withdrawals as compared to interest on a Loan Against Credit Card.
Can new customers avail a Loan Against Credit Card?
Yes, new customers can also avail a Loan Against Credit Card. The basic requirement is holding a Credit Card.