Considering a credit card loan during a cash crunch? This is a popular and easy way to access funds, be it a medical emergency or when your bike needs to be instantly repaired. No matter what reason you use it for, you can get money without spending hours completing applications and fulfilling other formalities. The best part about it is that it is instant.
It is offered against your credit limit and the way to access the funds is by visiting any ATM that your card is accepted at. Before you proceed, take a moment to plan. Such a loan comes with an interest rate, other charges and requires timely repayment. Advance planning will help you avoid potential pitfalls and keep your financial health intact.
Benefits and Risks of Loans Against Credit Cards
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Eligibility Terms and Paperwork Needed
Obtaining this kind of loan usually requires minimal documentation and comes with lenient eligibility criteria. Since you already have a card, you have already met the initial criteria and submitted the necessary documents. Your established relationship with your issuer simplifies the process.
Usually, the terms that qualify you for it are as follows:
- You are creditworthy
- You should have a stable income and employment
- You have been paying bills on time
In most cases, you do not need to submit any documents. The credit card company already has your:
- Proof of Identity
- Proof of Address
- Proof of Income
What To Know Before Applying for a Credit Card Loan
Although this loan option can provide quick access to cash, it’s essential to assess whether it’s the best choice for you. Here are some critical factors for you to consider before applying:
- Interest Rates
They typically have higher interest rates compared to traditional loans. Understanding the rate beforehand helps in budgeting and ensures you can manage repayments.
- Impact on Credit Utilisation Ratio
A credit card loan increases your credit utilisation ratio, which is the amount of credit you are using relative to your total credit limit. If you have a higher ratio, your credit score may take a hit, so be cautious.
- Potential Fees
Be aware of any additional costs associated with the loan, such as processing fees or penalties. These can escalate the total amount you owe, making the loan more expensive than initially anticipated.
Smart Strategies for Using Credit Card Loans Wisely
To best utilise this kind of loan and avoid financial trouble, consider the following tips:
- Borrow only what you can comfortably repay on time
- Set up automatic payments to prevent late fees and credit score drops
- Avoid maxing out your credit limit after taking the loan
- Use the loan for emergencies, not routine expenses
- Compare the interest rates with other loans before borrowing
- Plan your budget to cover both loan and card repayments
- Account for any processing fees linked to the loan
How To Go About It?
Taking this loan may be as simple as checking your eligibility by logging into the online account or mobile app. Then you can check the credit card company’s process. You may either need to visit an ATM or apply for it online and get the money transferred to your bank account or UPI ID. You can even call the customer care team of the issuer to start the process.
Many issuers provide this kind of loan. One such card you can consider is the OneCard credit card. It is a lifetime-free card that is very easy to apply for. It also gives you 5X rewards on select spending categories, helping you maximise your financial benefits.
Plus, with OneCash, you can borrow against your credit limit through its innovative app. The app also allows you to track and manage your spending all in one place. Visit the website or download the app to apply now!
