Nowadays the trend of credit card is increasing. Almost all banks have issued their own credit cards.
The advantage of a credit card is that despite not having the money, you can make purchases and pay bills later. There are many types of credit cards too and the spending limit through them also varies. Being convenient, most people are now keeping credit cards. Now banks are offering loans on credit cards. A loan on a credit card is similar to a personal loan. Some things should be taken care of before taking a loan on a credit card, otherwise the loss may occur. Learn about them.
Banks offer the facility of pre-approved loan based on the credit card limit. Banks cannot offer loans to anyone more than the credit card limit. The interest rate of this loan is less than the interest charged on the credit card. The rate of interest is fixed in advance. Typically, the annual interest rate for a credit card is 35–40 per cent.
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If someone takes a loan on a credit card, then it must be repaid at the given time. Not doing so increases the interest. With this, the possibility of getting a top-up loan decreases.
If the loan taken on the credit card is not paid on time, it causes the credit score to deteriorate. Banks do not offer loans quickly once the credit score gets bad. Going forward, it becomes difficult to get a loan if needed.
It is considered a default for not timely repayment of the loan installment on the credit card. Default in credit card payment and default in loan payment are different things. Not depositing the loan installments on time has a bad effect on the credit score, which is considered more serious than the credit card default.
The processing fees for loans on credit cards range from 1 to 1.5 percent. At the same time, the credit card holder has an option to decide how long the loan will be taken. It can be a maximum of 24 months. It also offers pre-closure. The pre-closure charge has to be paid separately.
In case of an emergency, taking a loan on a credit card is a good option. Generally, pre-approved loan is also available in such condition. This is available only when the record of the borrower is good. Credit card bills must be paid at the right time to keep records good. There is no documentation of pre-approved loan and processing is done quickly. This loan is available within a few hours.
