A credit card is a pivotal financial instrument, which permits you to borrow funds from the registered bank to mitigate your crucial expenditures while endowing you the freedom to repay the amount at zero interest within the due date. A credit card also comes with a line of credit, which can be utilized to make important payments. However, the amount should be repaid to the bank by the due date as mutually agreed by the cardholder and bank.
A loan against credit card is a kind of personal loan, which you can borrow against the pending credit card limit. Taking a loan against credit card includes no documentation, unlike a personal loan.
What is meant by a loan against credit card?
Loan against credit card is a funding choice available to credit card users instantly. A loan is provided against the unused credit card limit of the instrument. Here is what else you require knowing about the loan against credit card option:
∙ You can take up the loan against the unused limit of credit card instantly.
∙ Borrowers can opt for easy repayment options through EMI.
What are the advantages of using a loan against credit card?
Opting for a loan against credit has the below-listed advantages:
∙ Such loans get disbursed instantly as they do not require any documentation process.
∙ Amount that you will get as a loan against credit card can be directly transferred to your account, which makes it simpler for you to utilize the borrowed amount.
∙ Low rate of interest is applied on loan against credit card options, which makes such loans economically viable.
∙ You can avail the loan amount quickly on placing a request.
∙ Application process for the loan against credit card is performed online or via call in a few easy steps.
∙ You can simply apply for this loan type at any time from anywhere.
∙ Processing charges for this loan is minimal
∙ Borrowers can simply pay back the loan amount in monthly instalments, which gets billed to the credit card.
∙ Such loan is usually sanctioned for a period of 24 months, i.e., 2 years.
Why should you choose for a loan against a credit card option?
Firstly, if you own a credit card and require some money to mitigate your unforeseen or urgent expenditures, then you must go ahead and take up the loan against the credit card option. Note that there are set eligibility criteria that must be met before you apply for the loan against the credit card option.
∙ You necessarily should be an existing customer of the credit card issuer.
∙ Borrowers should mandatorily hold a credit card.
∙ It is crucial for you to hold an excellent credit score as well as an impressive record of all your credit repayments.
Before applying for the loan against credit card option, you should carefully review your past credit history using mobile banking, internet banking or approach the nearest bank branch. Also, it is pivotal to remember that once you opt for a loan for an amount more than your withdrawal limit on a credit card, against the unused limit of your card, your bank might block your card for further use until the time your account comes down, and your rest of the loan balance becomes lesser as compared to the withdrawal card limit.
Required documents for opting for a loan against credit card
In most cases, there absolutely is no documentation process involved in the procedure of opting for a loan against a credit card. It is because to avail of a loan, you should mandatorily hold a credit card, and to get the credit card, you should submit the needed documents. Until this time, you would have formed a healthy relationship with the bank against which you simply can avail a loan against a credit card.
However, when applying for the credit card, you require to present the listed documents:
∙ Copy of the address proof
∙ Identity proof
∙ Latest passport size photo
∙ Past three months salary slip, just for the salaried
∙ Copy of office identity card, just for the salaried
∙ Attested copy of latest ITR (just for the self-employed seekers)
∙ Copy of the PAN card (just for the self-employed seekers)
How can you submit an application for the loan against a credit card?
You should follow the listed steps to apply for the loan against the credit card option.
∙ Approach the official site of your issuer of whom you hold a credit card to borrow against credit.
∙ Fill up the form & then submit it alongside the required documents.
∙ After document submission, the bank will view your application form and then verify your submitted documents.
∙ On successful verification, the issuer will process the loan amount to your account or will give you a demand draft to avail the loan amount.
In case you look for applying for a loan against credit via the offline route, then you should approach the bank branch, from where you can borrow the required loan and then submit the application to the concerned issuer along with the documents.
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To end:
A loan against credit card is a kind of personal loan, just with the additional benefits. Users in general tend to get confused between the cash withdrawal using the credit card and borrowing of the loan against the credit card option. To understand it better, it is crucial for you to know that issuers provide you with the option of loan against credit with the unused credit card limit against your credit card. On the other hand, when you opt for the cash withdrawal option using your credit card, you are not opting for a loan from the issuer. Instead, you are availing funds from your existing credit card limit of your existing credit card.
Thus, if you look for an instant money source to meet emergency situations, then a loan against credit card can be an ideal option for you. You also can choose this option when the cash withdrawal limit on your credit card is less than your financial needs.
Those who are PPF account holders can opt for the loan against PPF option too. However, ensure that the loan against PPF can be taken after a year from the end of the financial year (FY) when the initial subscription took place.
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