Currently, many banks offer loans based on credit cards with various interest rates. Credit card-based loans are very similar to personal loans.
Obtaining loans based on credit cards has become increasingly convenient in today’s financial landscape. Many banks now offer these loans with various interest rates, making them easily accessible to those in need.
However, credit card-based loans and personal loans are very similar. Generally, these loans are unsecured and subject to a fixed rate of interest for a fixed period.
The loan amount based on your credit card should not exceed your credit card limit, and the interest rate is lower than the interest rate on credit card transactions.
If you have taken a loan based on a credit card, here are some things you need to know. Late payment of credit card bill may affect future top-up loan opportunities Many banks offer credit card top-up loans. The applicant must have a good credit score for this.
It’s crucial to understand that late payments on a credit card-based loan can significantly impact future loan opportunities. This underscores the importance of responsible financial management and the need to pay bills on time.
Effect on Credit Score: If you become a defaulter without repaying your credit card loan on time, your credit score will be severely affected. This will reduce your chances of getting loans in the future.
One key advantage of credit card-based loans is the flexibility they offer in choosing the loan tenure. This allows users to tailor their repayment period to their financial situation, empowering them to manage their commitments effectively.
Most banks that offer loans based on credit cards offer a maximum tenure of 24 months, and some offer a tenure of more than 24 months.
Interest rates on credit card transactions: Banks lend up to 75% of your credit card limit. Credit card interest rates apply on the remaining 25% limit.
If you make any transaction using your credit card and do not pay it off properly, you must pay an interest rate of 35 percent to 40% per annum.
Prepaying the loan: If you want to prepay the loan using a credit card, you can do so anytime without informing the bank. However, you must pay the prepayment charges levied by the banks.
Processing Charges: Banks charge processing charges if you take a loan based on the credit card. These processing charges vary from bank to bank. Generally, processing charges on personal loans range from 1% to 5%.