When you have a credit card, it can be tempting to use it for everything from taking out small loans to making big purchases. This is where having a credit card comes in handy. It gives you access to low-interest rates and a variety of other perks, like discounts on hotels and car rentals or priority reservations at some restaurants. However, that ease can also be your undoing. By using your credit card for anything other than purchasing things you can pay for right away, you put more pressure on the card and the lender by increasing the amount they’ll want to charge you in interest. Let’s take a look at how to get a loan against your credit card so that you don’t end up getting punished with high-interest rates or penalties if you miss payments.
How to Get a Loan Against Your Credit Card?
If you’re thinking about getting a loan against your credit card, you’re not alone. With so many perks that come with having a credit card, it’s easy to get a little carried away and use it for more than you can really afford. While it might be tempting to take out a small loan against your card to cover a large expense, do it only if you truly need the money. Otherwise, you could end up paying more in interest over the long term than if you’d just waited another month.
Before taking out a loan against your credit card, be sure to think about what you’re getting out of it. While taking out a small loan against your credit card to cover an important expense like a new couch might be fine, doing it to make a purchase you can’t afford is not only unwise but could also potentially damage your credit score. When you take a loan against your credit card, the lender is actually taking your credit and using it to issue a loan to you. If you make payments late or don’t pay the loan off at the end of the month, it can negatively impact your credit score.
Procedure To Get A Loan Against Credit Card
Know What You’re Looking For
Before you apply for a loan against your credit card, you’ll want to think about what you’re looking to accomplish. If you need the money immediately, then a loan against your credit card might be the right choice. However, if you’re looking to pay off some other debt you’d rather not take on, then a loan against your credit card is not likely to be helpful to you. Before you apply for a loan against your card, be sure you’re looking for a specific type of loan. Credit cards are designed with the sole purpose of helping you make purchases that you can’t otherwise afford.
Most credit card companies will let you take out a small loan against your card so you can make a large purchase or pay off a large amount of debt. However, you cannot use your card to make small everyday purchases like groceries or gas. This type of loan will negatively impact your credit score and could result in high-interest rates on your other credit cards as well.
Find the Right Lender
When you decide to take out a loan against your credit card, you’ll need to decide which lender you’d like to work with. If you already have a few credit cards with a particular lender, then you could take out a loan against one of those cards and end up paying them instead. To avoid this, you’ll want to find a new lender that offers a different product. Some credit card companies, like Capital One, offer a line of credit that you can use for a variety of different things.
However, most credit card companies only offer one type of product, like a loan. Before you apply for a loan against your credit card, take a step back and think about what type of person you are. If you’re someone who likes to overspend and make bad financial decisions, then you might find it difficult to get out of debt. Knowing this upfront can help you avoid choosing a lender that could end up being a bad financial fit.
Understand the Credit Requirements
Before you apply for a loan against your credit card, make sure you understand the credit requirements. All lenders will want to see some type of debt on your other accounts. However, each lender will have different requirements. Some lenders only want you to have one credit card and are okay with you having a balance. Others will only work with people who have less than 10% of their debt on credit cards. Knowing up front what type of person you are can help you decide which lender to work with. Some lenders only work with people who have a certain amount of credit. Knowing up front if you have a heavy debt burden and don’t want to take on more can help you choose a lender that works with less credit-worthy customers.
Apply for the Loan
Once you’ve found a lender and determined what type of loan you’d like to apply for, you’ll need to apply for the loan and pay the application fee. The application process can vary depending on the lender you’re working with. Most likely, you’ll need to provide your name, date of birth, address, and a variety of other personal information. You may also be asked to fill out a questionnaire that asks you questions about your financial situation and what types of purchases you’d like to take out a loan against your card for. Once you’ve completed the application and paid the application fee, you’ll be ready to go. The lender will review your application and decide whether or not to approve the loan.
Repay the Loan According to the Schedule
Assuming you’re approved, you’ll need to repay the loan according to the terms. Most lenders will want you to make at least one payment before the loan is completely repaid. However, some might require you to make two or more payments before the loan is fully paid off. Before you make your first payment on the loan, make sure you understand the terms and make sure you have enough money to pay the loan off. Some card companies might also offer special promotions that allow you to pay off your loan early. Be sure to check the terms and conditions on your card to learn more about these promotions.
Get Rewards for Being Good with Money
One final thing to keep in mind is that every time you use your credit card, you’re helping to build your credit. Credit cards work by providing a certain amount of credit to your account. The account will then let you borrow money from a lender at a later date. However, your credit score will be based on the amount of debt you have on the account. The more debt you have, the worse your credit score will be. Credit cards allow you to build credit by allowing you to spend money that, at some point in the future, you’ll be able to borrow against your credit score.
Top Banks offering Loans against Credit Card
|Bank||Loan amount||Interest rate||>Processing Fee||Repayment tenure|
|State Bank of India||At the discretion of the bank||At the discretion of the bank||Up to 2% of the loan amount subject to a minimum of Rs. Rs.499 and a maximum of Rs.3,000||Up to 48 months|
|HDFC Bank||The loan amount will be within the credit limit of your HDFC credit card||At the discretion of the bank||NIL||Up to 60 months|
|Indusind Bank(Indus Easy Loan)||At the discretion of the bank||At the discretion of the bank||Low processing fees||Flexible tenure|
|HSBC Bank||At the discretion of the bank||10.99% onwards||Contact the bank for information||Contact the bank for information|
If you find yourself in need of cash but don’t have a great plan for paying back the loan, you might be tempted to just take out a small loan against your credit card. However, doing so could end up ruining your credit. Be sure to only get a small loan against your credit card, and only if you absolutely need the money right away. Once you take out the loan, pay it off, and don’t touch it again. Your credit score will benefit tremendously from not having any open debts on your credit report.