Taking a loan against a credit card? Here’s what you must know

A credit card can help you plan your monthly expenses efficiently. You can make payments even if you don't have the requisite finances in your bank account. But you can also take a loan against a credit card to tackle a financial emergency.

Yes. You heard it right. Most banks these days allow you to take a loan against a credit card to meet your short-term financial requirements. Here's what you need to know about this facility.

What is a credit card loan?
 

A loan against a credit card, or simply a credit card loan, is a personal loan that can be taken against a credit card's unutilised or pending limit. It is a short-term funding option available to credit card holders. You can repay a loan against your credit card in Equated Monthly Instalments (EMIs). The EMI amount is normally added to your monthly credit card bills.

Features of a loan against a credit card
 

Below are the salient features of a personal loan on a credit card - 

· Interest rate –
 

The bank charges on these loans are usually lower than a normal personal loan. However, it varies from one lending institution to another.

· Loan amount –
 

 Since the loan is given against the unutilised limit of a credit card, the maximum loan amount cannot exceed the credit card limit. However, some banks allow you to get a loan over your credit card limit.

· Documents required – 
 

Most times, credit card loans are pre-approved. It means that you are not required to submit any additional documents to avail of it. The loan amount is directly transferred to your bank account within a few days of the application.

· Loan tenure –
 

 These loans are generally short-term loans with their tenures ranging between 6 and 24 months.

· Processing charge -

Banks may charge a processing fee for disbursing a loan against a credit card.

· Collateral –
 

These loans are unsecured. You don't require a guarantor or collateral to apply.

Are there any limitations of a credit card loan?
 

While there are several benefits of taking a credit card loan, there are a few drawbacks as well - 

· Your credit card limit may get blocked until you've repaid your loan EMIs

· Not all credit card holders are eligible to avail of this loan

· The interest rate can be higher than secured loans

· Late payment of EMIs can hamper your credit score

​​How to get a loan against a credit card?

You can apply for a credit card loan online or by phone. You can either visit your bank's website and log in to your NetBanking account or contact the customer care representative of your credit card provider.

Conclusion
 

A loan against a credit card can help you tackle your short-term financial requirements easily. However, you should apply for it only when there's a necessity. IDFC FIRST Bank allows you to take a credit card loan at competitive interest rates. IDFC FIRST Bank offers lifetime free credit cards with affordable interest rates starting from just 9% per annum. 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.