What Is A Loan Against A Credit Card?
A loan taken out against a credit card is very similar to a personal loan in that it has a fixed rate of interest over a predetermined period of time and is unsecured (requires no collateral). The maximum loan amount you can avail cannot be greater than the credit card’s credit limit, and the interest rate is lower than the standard rates for credit card transactions (the annual rate of interest on credit cards is typically between 35% and 40% but more than HDFC personal loan interest rates, however, it can sometimes be higher – varies by card). Here are some things you should know if you have a loan on your credit card:
- Your ability to obtain a top-up loan may be impacted if you make late payments: A top-up loan is a loan that is given on top of your current loan. Top-up Credit Card Loans on Loan Against Credit Cards are widely available from credit card issuers. Individuals can obtain top-up loans from many banks using their credit cards. An applicant must have a clear credit history free of any instances of late payments in order for their application for an HDFC Jumbo loan to get approved. If you need money right now, it is simpler to choose this option because it has the same interest rate but more than HDFC personal loan interest rates and terms. However, the top-up loan is only made available to current customers who have a solid repayment history, that is, borrowers who have consistently made on-time payments without any defaults or late repayments. Late payments may affect your ability to receive a top-up if you have a credit card loan. In any event, avoid late payments if you want to continue receiving loans in the future.
- Rather than a credit card default, a default is recognized as a loan default: Defaults on loan repayments have a much different effect than those on credit card payments. A credit card loan default is equivalent to a loan default and will have a considerably more negative impact on your credit score. Although defaults on credit cards also have a sizable influence on credit scores, defaults on loans, particularly home loans, have a more noticeable effect.
- You are free to select the tenure you want: The majority of credit card loans such as HDFC Jumbo loan provide a flexible tenure option, allowing the consumer to select the length of the repayment schedule. You, the borrower, get to determine the loan term when you apply for a loan. For credit card loans, lenders typically offer terms of up to 24 months, allowing you to select the term that best suits your needs and monthly payment capacity. The longest term permitted by the majority of banks that provide unsecured loans against credit cards is 24 months. Some banks also provide tenure options that are longer than 24 months.
- Credit card transactions that incur interest are subject to standard credit card interest rates: Let’s say that the amount you owe on your credit card is 75% of it. The standard credit card interest rates will be applied to the remaining 25%. Meaning that interest rates of around 35% per year will hold appropriately relevant if you use your card to make a transaction and fail to repay it during the interest-free period (as is applicable on your credit card). If your credit score is high—say, 750 or higher—you may get a loan at a personal loan interest rate at a very competitive interest rate. While Insta Jumbo Loan is available at 15%, HDFC Personal Loan Interest Rates begin at 10.75% annually.
- At any time, you can pre-close your loan: You don’t have to notify your bank if you want to pre-close the loan you have on your card. You can do it whenever you want. There will be pre-closure fees, as set by your lender that you need to pay.
- Processing fees are also important: Processing fees are assessed on your loan when you take out a credit card loan, and the amount charged mostly depends on the bank in question. The majority of the time, processing fees for personal loans are between 1% and 5%.
Insta Jumbo Loan From HDFC
A pre-approved loan is available to owners of HDFC credit cards by way of the HDFC Jumbo loan. To put it another way, it is a limit assigned to the cardholder that is higher than her current credit limit. This payment is transferred to their HDFC savings account in one lump sum. They are free to use it any way they see fit and repay it in equal monthly instalments. The best thing about this loan is that you can use both the credit card and the HDFC Jumbo loan amount at the same time because your existing credit limit is not blocked while you utilize this Jumbo Loan amount. Application and disbursement procedures for this loan are relatively straightforward considering it is a pre-approved offer, after all. No proof or documentation is thought to be required. You may easily apply online, and if accepted, the money will be transferred to your account right away.
Conclusion
Because credit card loans are unsecured, they are more expensive than loans that are secured, even if you compare them with HDFC personal loan interest rates. Therefore, it is advised to only use a loan against a credit card in an emergency situation when you have no collateral and a pressing need for money. If you qualify, you might also think about getting a personal loan rather than using your credit card because the interest rate is still cheaper. Taking out such expensive loans for indulgences or purchasing expensive stuff like electronics, cars, furniture, etc. is not a good idea. Therefore, it is essential to evaluate your needs and choose the appropriate borrowing option.