Explained! Loan On Credit Card And Its Impact On Your Credit Score

If you need quick funds for your financial needs, a loan on credit card can be a good idea. Use it well to keep your credit score healthy!

A loan on credit card is offered against your credit limit.
For example, if the credit limit is ₹5 lakhs, you can get a loan of up to ₹5 lakhs.

Your credit limit affects your credit utilisation ratio - a factor affecting your credit score.

The higher the ratio, the lower the credit score.

Credit utilisation ratio = (credit used / credit limit) X 100
So, if your limit is ₹5 lakhs and you use ₹1 lakh credit, the ratio is 20%.

When you take a loan against the card, the credit used increases, but the limit doesn’t.
This drives up the credit utilisation ratio, affecting the credit score.

Moreover, if you do not repay the loan EMIs on time, your credit score is impacted due to missed payments.

To avoid any impact on your credit score, borrow only what you need to and pay the EMIs on time. Get the funds and protect your score too!

For affordable loans, choose IDFC FIRST Bank Credit Cards. Get loans at interest rates starting from just 9% p.a., one of the lowest in the market.