A major advantage of using credit cards is the availability of numerous features that are absent in other financial tools. Features including reward points, discounts, cash-backs, loan options, etc. have increased the number of credit card users in India. Over the course of last year, the number of credit cards has increased by 27% almost touching 50 million by the middle of last year.
Among the numerous features which financial institutions offer on these cards, a loan against a credit card can be an especially helpful feature. It is important users learn both the advantages as well as the disadvantages of availing such a loan.
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Advantages of loans on credit cards
The multiple advantages of loans which are offered on credit cards are discussed underneath.
- Easy availability: Loan against credit card can be easily availed by users with just a phone call or online intimation. Resultantly, this loan option can be especially helpful in emergency situations where an individual needs access to prompt financing. The rates of interest on these loans are also better than those on cash withdrawal using credit cards.
- Avoiding hassle: The application procedure for a loan on a credit card does not require the input of personal and financial details. This is since all the necessary details are already updated with a credit card In turn, this helps save time for the applicants and hastens the process of application. The approval process is also faster since there is no necessity for any verification.
- High-value purchase: Customers can avail loans on credit cards even if it exceeds their credit card balance. This allows customers to use their credit cards to make high-value purchases even beyond their credit limit.
- Collateral free: These loans are not issued against any collateral. As a result, customers do not have to worry about losing any of their assets even if they are unable to repay the loan as per repayment terms. This also makes their application and approval easier since neither do applicants have to provide asset related documents nor do financial institutions have to verify them for the approval.
- Easy repayment: Among the numerous reasons to opt for a personal loan on the credit card, a major reason is that their repayment is easy since the total amount can be broken into EMIs and repaid over months on the card.
- Tenor options: Borrowers can choose the repayment tenor for their loan against credit card according to their convenience since financial institutions offer flexibility in the same. Depending on the institution, borrowers can choose the number of months over which they would prefer to repay their loans.
You can consider, for instance, the Bajaj Finserv RBL Bank SuperCard which offers emergency loan options with an interest-free period of up to 90 days against a nominal processing fee of 2.5%.
Disadvantages of loan on credit cards
While loans issued on credit cards offer many advantages, there are a few issues that must be kept in mind by borrowers.
It is important borrowers learn how to repay their credit card debt on time since the loan can increase the credit card bill substantially in case the user is unable to repay it. Consequently, if a borrower misses out on repayment, he/she would be subject to additional expenses due to late payment or not meeting the minimum repayment quota of their credit card balance.
However, it is evident that the disadvantages of a loan on a credit card can be easily avoided with discipline and planning of expenditures. For new users of credit card or potential applicants, it is important to have strict financial habits. Potential applicants can be assured of fast approval with financial institutions like Bajaj Finserv. This NBFC provides pre-approved offers that make availing financial products simple and time-saving. These offers are available on credit cards as well as on personal loans, home loans, and numerous other financial products. You can check out your pre-approved offer by providing a name and phone number.
While availing a loan against a credit card, borrowers should keep it in mind to plan their repayment. New users should also check out the numerous convenient options to pay their credit card bills. They can even sync their financial accounts to ensure that their bills are cleared directly.