Should you take a Loan on Credit Card?

A Credit Card allows you to buy products and withdraw cash up to your credit limit. The debt gets accumulated in your name and you have the option of paying it later. But did you know that you can also get a Loan on a Credit Card?

Banks often approach their Credit Card customers with pre-approved loan offers on their cards. These loans are processed faster and don't require extensive paperwork. But is it good to take a Loan on Credit Card? Make an informed decision after considering the pros, cons and other important factors.

What is a Loan on a Credit Card?

A Loan on Credit Card is a pre-approved loan offer made by the bank. Banks offer this unsecured loan to selected customers based on their credit history, credit score and relationship with the bank. You get the loan amount in your Savings Account and repay it with interest later. You are not required to do any paperwork because you submit all the necessary documents when you apply for a Credit Card.

If you have an Axis Bank Credit Card, you may be eligible for an Instant Loan on Credit Card. This loan is offered to select Credit Card customers without any documentation. Once your loan is approved, the amount will get directly disbursed to your Axis Bank Savings Account. You can choose between multiple repayment tenures, according to your budget.

Pros and cons of taking a Loan on Credit Card

Pros

• No paperwork required
• No collateral needed
• Quick access to funds in your Savings Account
• Flexible repayment schedule

Cons

• Eligibility: Simply having a Credit Card doesn't make you eligible for a Loan on Credit Card. Banks offer such loans to Credit Card users that have a good repayment history and a favourable credit score.
• Higher interest rates: Banks charge higher interest rates on Credit Card Loans compared to Personal Loan.
• Reduced credit limit: Once you borrow money against your Credit Card, your credit limit is reduced by the loan amount.

Factors to consider before applying for a Credit Card Loan Required amount

The amount of a Loan on Credit Card depends on your credit limit. Compare your credit limit with the amount that you need. For instance, assume that you need ₹2,00,000 for your college fees. If you have a credit limit of ₹85,000, you will probably not get the required amount as a Loan on Credit Card.

Interest rate

Don't forget to check the Credit Card interest rates before accepting the loan offer. Compare the interest rate with other loan options you can use, such as a Personal Loan or Gold Loan. You can also compare the rate with what other lenders are offering.

Repayment period

Check how much time you will have to repay your Credit Card Loan. Make sure that you will be able to repay the loan within time to avoid late payment charges, fines and increased interest charges.

Also Read: Credit Card without income proof

Conclusion

A Loan on Credit Card can help you with your urgent financial needs because it's quick and easy to procure. Before you accept this offer, check your Credit Card documents to understand the rules, conditions, interest rates and repayment schedule. Make sure that you can afford to pay back your loan within time. You can use Axis Bank's Instant Loan on Credit Card Calculator to check the total amount payable.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author 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. Please consult your financial advisor before making any financial decision