A loan on credit card, also known as a credit card loan, is a type of personal loan that you can take out against your available credit limit. It's essentially borrowing money from your credit card issuer, who will deposit the funds into your bank account. You'll then need to repay the loan, along with interest and fees, over a fixed period of time.
Loan on Credit Card Interest Rates
Understanding the interest rates associated with loans on credit cards is essential for responsible financial management. Whether obtained through cash advances or balance transfers, credit card loans often come with distinct interest structures.
The Interest rates on loans on credit cards can vary widely depending on several factors, including your credit score, the amount of the loan, the repayment term, the credit card issuer and so on.
| Loan on Credit Card Interest Rates | Starting at 10.99% p.a. onwards |
|---|
Calculate Your EMI
Equated Monthly Instalments (EMI) are a crucial aspect of managing loans and providing borrowers with a structured repayment plan. Calculating your EMI empowers you to understand the monthly financial commitment associated with a loan.
Knowing how to calculate your EMI will help you navigate your loans more effectively and help you plan your budget and finances better.
To calculate the loan EMI manually you can use the following formula:
EMI = P x R x [(1+R)^N] / [(1+R)^N - 1]
Where,
- EMI is the equated monthly instalment.
- P is the principal amount.
- R is the interest rate.
- N is the loan tenure.
This is how you use this formula-
For example, let's say you take a loan of ₹25,000 with an interest rate of 6% for 5 years. Using the formula, your EMI would be:
P = Rs 25,000.
R = 6% i.e., = 0.06 (approx)
N (in months) = 60
Now using the formula;
EMI = 25000 * 0.06 * [(1 + 0.06)^60 / (1 + 0.06)^60 - 1]
Your monthly EMI will be around Rs 483
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Loan on Credit Card Eligibility
While you are exploring loan opportunities on credit, there are specific eligibility criteria that you have to fulfill. The eligibility criteria for loans on credit cards can be different based on different financial institutions. Aligning with these criteria are essential steps toward a successful loan application.
- Credit Score: A good credit score of 700+ for higher chances of approval and potentially lower interest rates.
- Credit Utilization Ratio: Ideally below 30% of your credit limit, demonstrating responsible credit use.
- Income and Debt-to-Income Ratio: Sufficient income to comfortably manage loan repayments and existing debt.
- Cardmember History: Long standing relationships with the issuer and consistent on-time payments can improve your chances.
Documents For Loan Loan on Credit
The documents required for a loan on a credit card can vary from lender to lender. But some of the common documents required are:
- Proof of Identity: Passport, driver's license, PAN card, or any government-issued ID.
- Proof of Address: Utility bills, rental agreement, or any document verifying the current residential address.
- Proof of Income: Salary slips, bank statements, income tax returns, or other documents confirming a regular income.
- Employment Verification: Employment certificate or letter from the employer confirming job tenure and salary details.
- Credit History: Credit report and score, showcasing your creditworthiness.
- Loan Application Form: Completed application form provided by the lender.
- Photographs: Passport-size photographs.
Top Banks Offering Loan on Credit
| Bank | Interest Rate | Loan Amount | Processing Fee |
| State Bank of India | 8.00% - 13.00% | ₹5,000 - ₹5 lakhs | Up to 2% |
| Bank of Baroda | 8.50% - 14.00% | ₹10,000 - ₹2 lakhs | Up to 3% |
| Canara Bank | 9.00% - 15.00% | ₹15,000 - ₹3 lakhs | Up to 1% |
| HDFC Bank | 10.00% - 16.00% | ₹25,000 - ₹10 lakhs | Up to 4% |
| ICICI Bank | 10.50% - 17.00% | ₹50,000 - ₹5 lakhs | Up to 5% |
| Axis Bank | 11.00% - 18.00% | ₹10,000 - ₹7 lakhs | Up to 4% |
| HSBC | 9.50% - 15.50% | ₹20,000 - ₹15 lakhs | Up to 3% |
| Standard Chartered Bank | 10.00% - 16.00% | ₹50,000 - ₹20 lakhs | Up to 5% |
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Note: These rates are indicative and subject to change. Always check with the bank for the most up-to-date information before making any investment decisions.Not sure of your credit score? Check now for free!
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Benefits of Loan on Credit Card
There are many benefits to taking a loan on credit card, like:
- Immediate Access to Funds: A loan on a credit card provides swift access to funds, allowing for quick financial assistance during emergencies or urgent needs.
- Convenience: The process of obtaining a loan on a credit card is often convenient, as it can be done online or through ATMs, eliminating the need for extensive paperwork.
- Flexible Repayment Options: Credit card loans typically offer flexible repayment options, allowing cardholders to choose the duration and method that best suits their financial situation.
- No Collateral Required: Credit card loans are unsecured, meaning borrowers don't need to provide collateral, reducing the risk of asset loss in case of non-repayment.
- Interest-free Periods: Some credit cards offer interest-free periods on certain transactions, providing a window during which no interest accrues if the balance is paid in full.
- Rewards and Cashback: Depending on the credit card, borrowers may earn rewards points or cashback on transactions, providing additional financial benefits.
Repayment Option For Loan on Credit
There are several ways to choose from while you are looking to repay your loan on a credit card. Some of these are:
- Fixed Monthly Installments (EMIs): Choose a specific repayment amount and divide it into equal monthly installments over a set period. This provides predictable payments and clarity on when you'll be debt-free, but flexibility might be limited.
- Minimum Payment: This is the minimum amount you're required to pay each month, usually around 2-5% of the outstanding balance. While it keeps your account in good standing, it extends the repayment period significantly, incurring more interest charges.
- Accelerated Payments: Pay more than the minimum amount each month to shorten the repayment period and reduce the total interest paid. This requires discipline and financial flexibility, but saves you money in the long run.
- Balance Transfer: Move your credit card debt to a new card with a 0% introductory APR offer for a limited period. This can be a strategic move to save on interest, but ensure you pay off the balance before the introductory period ends to avoid high penalty rates.
- Debt Consolidation Loan: Consider a personal loan with a lower interest rate to consolidate your credit card debt. This simplifies your repayments into one monthly payment but might involve additional origination fees.
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Frequently Asked Questions
Loan against credit card is borrowing cash from your credit limit, like a mini-loan with your card's interest rate and repayment terms.
A loan against a credit card involves accessing available credit as cash, essentially borrowing from your own line of credit with the card's specific interest rate and repayment terms.
Depending on your specific credit limit and any pre-approved offers, it could also vary from lender to lender and several other factors.
You can choose fixed monthly installments, accelerated payments, or minimum payments, depending on your budget and goals.
Quick access to cash, potentially lower rates than some personal loans, and flexible repayment options, but beware of high interest rates if you have bad credit.
High interest rates, potential debt trap, and reduced credit limit, all while sacrificing other credit card benefits.
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