Financial emergencies can arise unexpectedly, and having quick access to funds becomes essential. Among the various borrowing options available, a Loan on Credit Card is an underutilised yet highly convenient solution. Despite its benefits, several myths surround this financial tool, leading many to overlook it.
This article aims to debunk common misconceptions and provide factual clarity about a Credit Card loan, helping you make informed financial decisions.
What Is a Loan Against a Credit Card?
A Credit Card loan allows cardholders to borrow funds based on their available credit limit or beyond it. This facility provides instant access to money without requiring additional documentation or collateral.
Common Myths and Facts About Loans on Credit Cards
Myth 1: Only High Credit Scores Qualify for Credit Card Loans
Fact: While a good credit score can help secure better loan offers, meaning your creditworthiness was assessed when you obtained the card. Leading banks like ICICI Bank often provide these loans to eligible cardholders without additional credit score checks.
Myth 2: Interest Rates Are Unreasonably High
Fact: A common misconception is that a Loan on Credit Card carries exorbitant interest rates. In reality, the rates are competitive and often lower than those on regular credit card transactions.
For instance, many lenders offer fixed interest rates with predictable monthly payments, making it easier to manage.
Myth 3: It’s the Same as a Cash Advance
Fact: While both provide access to funds, a Credit Card loan is different from a cash advance.
● Credit Card Loan: Structured with a fixed repayment tenure and EMI options.
● Cash Advance: Involves higher interest rates and no EMI structure.
Choosing a loan instead of a cash advance ensures better financial planning and lower overall costs.
Myth 4: Repayment Terms Are Inflexible
Fact: Credit card loans offer flexible repayment tenures, typically ranging from 6 to 60 months, depending on the lender. Using tools like loan calculators, you can choose a tenure that aligns with your repayment capacity.
Myth 5: Processing Takes Too Long
Fact: One of the biggest advantages of a Credit Card loan is its quick disbursal process. For eligible cardholders, the loan can be approved and credited within a few hours or even instantly
Key Benefits of a Loan on Credit Card
|
Feature |
Benefit |
| No Documentation | Minimal paperwork |
| Quick Access to Funds | Disbursal within hours of application. |
| Flexible Tenures | Tailored repayment plans to suit your finances. |
| No Collateral Needed | Unsecured loans based on your credit history. |
| Transparent Charges | Clear terms with no hidden fees. |
When to Consider a Loan Against a Credit Card?
A Credit Card loan can be an ideal choice for the following situations:
- Medical Emergencies: Quick access to funds for urgent medical needs.
- Education Costs: Short-term financing for tuition or training programs.
- Travel Expenses: Financing last-minute travel plans.
Tips to Use a Credit Card Loan Wisely
1. Calculate the EMI in Advance
Use a loan calculator to estimate your monthly EMI based on the loan amount, interest rate, and tenure. Ensure the EMI fits comfortably within your monthly budget.
2. Compare Interest Rates
Different lenders offer varying interest rates on credit card loans. Compare multiple offers to secure the most cost-effective deal.
3. Opt for a Shorter Tenure
While longer tenures reduce the EMI, they increase the total interest paid. Choose a tenure that balances affordability and cost-efficiency.
4. Avoid Over-Borrowing
Borrow only what you need. Overborrowing can strain your finances and affect your credit utilisation ratio, impacting your credit score.
Common Scenarios Debunked
Scenario 1: Prepayment Penalty
Myth: Prepaying a credit card loan always attracts penalties.
Fact: Many lenders allow part-prepayments or full prepayments without extra charges. Confirm with your lender before opting for this feature.
Scenario 2: Hidden Charges
Myth: Credit card loans are riddled with hidden fees.
Fact: Reputable lenders disclose all charges upfront. Read the terms and conditions to avoid surprises.
Scenario 3: Impact on Credit Score
Myth: Taking a loan against a credit card negatively affects your credit score.
Fact: Timely repayment of your loan improves your credit score by showcasing responsible financial behaviour.
Advantages Over Other Loan Types
|
Loan Type |
Processing Time |
Documentation |
Interest Rate |
| Credit Card Loan | Instant | Minimal or None | Competitive and Fixed |
| Personal Loan | 1-2 Days | Extensive | Higher than Credit Card Loan |
| Loan Against Property | 1-2 Weeks | High | Lower but Requires Collateral |
How to Apply for a Loan on a Credit Card?
Step 1: Check Eligibility
Log in to your bank’s net banking portal or app to see if you qualify for the loan.
Step 2: Review Loan Details
Understand the interest rate, processing fee, tenure, and other terms offered by the lender.
Step 3: Use a Loan Calculator
Estimate your EMI and total repayment amount to ensure affordability.
Step 4: Submit the Application
Fill out the application form online or through your bank’s mobile app.
Step 5: Receive Funds
Once approved, the loan amount is credited to your account instantly or within a few hours.
Conclusion
A Credit Card loan is a flexible, convenient, and quick solution for short-term financial needs. While myths surrounding this facility can deter some borrowers, understanding the facts reveals its true benefits. By using tools like loan calculators, comparing interest rates, and adhering to responsible borrowing practices, you can make the most of this financial option.
Choose a trusted lender like ICICI Bank to enjoy competitive rates, transparency, and exceptional service. Whether it’s an emergency or a planned expense, a Loan on Credit Card can be the financial bridge you need.
Disclaimer:
CBD:
Qrius does not provide medical advice.
The Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act) outlaws the recreational use of cannabis products in India. CBD oil, manufactured under a license issued by the Drugs and Cosmetics Act, 1940, can be legally used in India for medicinal purposes only with a prescription, subject to specific conditions. Kindly refer to the legalities here.
The information on this website is for informational purposes only and is not a substitute for professional medical advice, diagnosis, or treatment. Always seek the advice of your physician or another qualified health provider with any questions regarding a medical condition or treatment. Never disregard professional medical advice or delay seeking it because of something you have read on this website.
Gambling:
As per the Public Gambling Act of 1867, all Indian states, except Goa, Daman, and Sikkim, prohibit gambling. Land-based casinos are legalized in Goa and Daman under the Goa, Daman and Diu Public Gambling Act 1976. In Sikkim, land-based casinos, online gambling, and e-gaming (games of chance) are legalized under the Sikkim Online Gaming (Regulation) Rules 2009. Only some Indian states have legalized online/regular lotteries, subject to state laws. Refer to the legalities here. Horse racing and betting on horse racing, including online betting, is permitted only in licensed premises in select states. Refer to the 1996 Supreme Court judgment for more information.
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