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Loan on Credit Card – Application Process, Requirements, Comparison, And Benefits
Credit cards are a small plastic tool that allows you to buy things without paying for them. However, a bill is generated at the end of the month, and you have to pay it within the due date. However, sometimes you may require an additional amount for some emergencies. In such cases, you can take a loan against a credit card. Taking a loan against a credit card is a very common phenomenon, and almost all banks offer such loans. Read to find out what a loan against a credit card means and how to take one.
What is a loan on credit card?
A loan on a credit card is similar to a personal loan. It is an unsecured loan, doesn’t require any collateral, and has a fixed tenure. The maximum loan amount is limited to the credit limit on the card, and the interest rate is lower than the credit card interest rates. Once the loan is approved, you will receive it either through a demand draft or in your account.
Following are the features of a loan against a credit card
- Unsecured loans: Credit card loans are personal and unsecured loans. You don’t need collateral such as property, or gold to apply for such loans.
- Pre-approved: Most credit card loans are already pre-approved. Do not need any additional documentation till you are taking a loan within the credit card limit.
- Repayment through EMI: You can repay credit card loans in equated monthly instalments (EMI). The EMIs are usually added to your credit card bill.
- Limit on the loan amount: The maximum amount of loan you can avail is limited to the credit card limit. But some banks give a loan exceeding the credit card limit. However, it requires additional documentation and involves more procedures.
When should you take a loan against a credit card?
If you need money for some unforeseen expense or emergency, go ahead and take a loan against your credit card. However, you can take a loan only if you are eligible.
Following are the eligibility criteria for taking a loan against a credit card.
- Most banks offer credit card loans only if you are an existing customer. This means you have an account with them.
- You must have a credit card to take a credit card loan.
- A good credit history is a prerequisite. Banks often provide loans to customers with a good credit scores.
- If you fall under the high-income bracket, you will be eligible to top up your existing loans against your credit card. You will also be eligible for a higher loan amount in case you don’t have a credit card loan already.
Documents required to take a loan on credit card
You don’t need any documents for applying for a credit card loan as you would’ve submitted them already while applying for a credit card. Since it is a must to have a credit card to get a credit card loan, the following documents are required to apply for a credit card.
- Passport size photographs
- Identity proof such as PAN Card, Aadhar Card, voter ID, driving license or passport
- Address proof such as Aadhar Card, utility bills, or driving license
- Payslips and office identity cards in case of employees
- Self-employed professionals require income tax returns from the last three years
How to apply for a loan on credit card?
You can apply for a credit card loan online by logging into your net banking facility. Alternatively, you can apply offline by visiting the bank branch and submitting an application. Following are the steps required to apply for a credit card loan online.
- First, log in to the net banking facility of your credit card provider.
- Second, select your credit card under the cards tab and apply for a loan.
- Next, fill in the application form and submit any documents the bank asks for.
The bank will verify your documents, and upon successful verification, you will get the loan amount in your account or get a demand draft.
Interest rates for loans on credit cards
The interest rate for a loan against a credit card varies between 12% and 20%. Since credit card loans are personal loans, their interest rate is slightly higher than the car or home loans. The interest rate varies from bank to bank. Moreover, it also depends on your credit history and the type of credit card (silver, gold or platinum). A good credit score or higher grade card can fetch you lower interest rates.
List of banks that provide loans against credit card
Almost all banks provide loans against credit cards, and the following are just a few.
- State Bank of India – SBI Card Encash
- HDFC Bank – Insta Loan and Insta Jumbo Loan
- IndusInd Bank – Indus Easy Loan and Indus Easy EMI
- HSBC Bank – Instant Loan on Phone
- Kotak Mahindra Bank – Loan on Credit Card
- IDBI Bank – General Credit Card Loan
Here are some of the banks with their loan on cards offerings –
Note: These are just for informational purposes only. The interest rates, offers, fees, and terms & conditions might change/ might be incorrect after publishing this data. Please check the official websites for detailed insights on this.
Comparison of few banks for loan on credit card
| Bank Name / Product Name | Credit Limit | Processing Fee Terms | Interest Rate | Late Payment Terms | Fee | Link for Details |
| SBI Credit Card Encash |
Based on individual details | A one-time processing fee of 2%, minimum of Rs. 499 a maximum of Rs. 3,000. | 13.50% to 20.25% p.a.
Bureau score <=700 Or no score is available: 18.25% to 20.25% p.a |
Late payment fees and a maximum credit charge of 3.5% p.m. (42% p.a.) for Unsecured card, 2.75% p.m. (33% p.a.). for Secured card and 2.75% p.m. (33% p.a.) | Foreclosure fee amounting to 3% of the Principal outstanding | Encash – Get instant cash| SBI Card |
| HDFC Bank – Insta Loan and Insta Jumbo Loan | Based on individual details | Processing fee – up to Rs. 999 based on the customer’s eligibility or offer details. | Insta Loan Minimum interest rate: 11.88% Maximum interest rate: 22.32%Jumbo Loan Minimum interest rate: 11.88% Maximum interest rate: 21.96% |
– Auto Debit return penal charges 2% on payment amount subject to minimum Rs.450 will be levied.
– Non-payment or partial payment of EMI outstanding will attract late payment penalty of Rs.500 plus GST |
3% on the outstanding principal amount plus GST | HDFC Bank – Loan on Credit Card |
| IndusInd Bank – Indus Easy Loan | Based on individual details | 2.5% of the loan amount or Rs. 250, whichever is higher. | The annual interest rate will be communicated at the time of your Loan request | Limited information on the official website OR depends on case-to-case basis | Limited information on the official website OR depends on case-to-case basis | Loan on Credit Cards – IndusInd Bank |
| HSBC – Loan on Phone | Limited information on the official website OR depends on case-to-case basis | 2.5% of the loan amount or Rs. 200, whichever is higher. | The annual interest rate will be communicated at the time of your Loan request | Limited information on the official website OR depends on case-to-case basis | 3% on the outstanding principal amount of the loan, subject to a minimum of INR250 | https://www.hsbc.co.in/credit-cards/loan-on-phone/ |
| Kotak Mahindra Bank – Loan on Credit Card | Up to Rs. 15,00,000 | Limited information on the official website OR depends on case-to-case basis | 12% to 25% per annum on reducing balance | Limited information on the official website OR depends on case-to-case basis | 3% on the outstanding principal amount. | Kotak Bank – Personal Loan on Credit Card |
| IDBI Bank General Credit Card Loan (IDBI GCC) | Minimum – Rs. 50,000 Maximum – Rs. 5,00,000 |
Limited information on the official website OR depends on case-to-case basis | Limited information on the official website OR depends on case-to-case basis | Limited information on the official website OR depends on case-to-case basis | Limited information on the official website OR depends on case-to-case basis | IDBI Bank Geneal Credit Card Loan |
| ICICI Bank – Personal Loan on Credit Card | Maximum up to Rs. 20 Lakh. | 1% of total loan amount | Starting from 14.99% | Due amount can range anywhere from 1.25% to 3.67% on total amount due. | Up to 3% | ICICI Bank – Personal Loan on Credit Card |
Benefits of loan on credit card
- To apply for a credit card loan, you do not have to file documents or give collateral.
- The loan is an easy way to get instant cash for emergencies.
- The repayment can be made in easy EMIs, making it easy to plan your expenses well in advance. The EMIs will be directly billed to your credit card.
- Credit cards also offer cash withdrawals. However, they charge interest as high as 36%. The interest for a loan against a credit card is lower than cash withdrawals.
- Credit card loans offer flexible loan tenures.
- Banks charge a very low processing fee for credit card loans.
Things to remember before taking a loan against a credit card
- Loans are given only if you have a good credit score: You can get a credit card loan only if you have a good credit score. To maintain a good credit score, pay your EMIs and credit card bills on time.
- Late payments can affect your chances of getting future loans: If you delay paying an instalment, your chances of getting a future or a top-up loan are close to nil. Banks avoid giving loans to people who default on their payments often.
- Default in paying an EMI is considered a loan default: A loan default has a greater impact on your credit score than a credit card default. If you default on your loan payment, your credit score will decrease drastically.
- You can choose a tenure of your choice: Banks allow their customers to choose the tenure of the loan payment within the maximum limit. The maximum tenure allowed is usually 24 months. You can choose any tenure within the 24-month limit.
- Pre-closure of loan is an option: You can pre-close a credit card loan anytime without informing the bank. However, the pre-closure charges will be applied per the bank’s norms.
- Check processing fees before you apply: To process your loan against the credit card, banks charge a small fee called a processing fee. A high processing fee will reduce the loan amount you get. So choose banks with low processing fees to apply for a credit card loan.
Conclusion
Credit cards are an easy way to get instant cash during emergencies. However, they are still in debt, and you still have to pay interest. Hence always be emergency ready by having an emergency fund that covers at least six months of your expenses. If your fund does not cover your emergency, go for a credit card loan. This way, you are reducing your total debt.
Frequently Asked Questions
Can we borrow money from a credit card?
Yes, you can definitely borrow money from a credit card through a loan or a cash withdrawal. A credit card loan has less interest compared to cash withdrawal.
Is it worth taking a loan on a credit card?
A credit card is a saviour if you require money urgently. However, nothing is better than having an emergency fund to help you in case of any emergency.
How much cash can I borrow from my credit card?
You can borrow 20%-40% of the total credit card limit as cash. So if your credit card limit is Rs 50,000, you can get Rs 10,000 – Rs 20,000 as cash.
What is the interest rate for a loan against a credit card?
Credit card loan interest rates vary from bank to bank and range between 12%-20%. The interest rates also depend on your credit score or the type of card you hold. If you have a good credit score and hold a platinum card, your interest rate will be lower compared to a person with a bad credit score or a lower grade card.
Can I transfer money from my credit card to my bank account?
Yes, you can transfer money from a credit card to a bank account using a cheque, NEFT, RTGS, or an ATM.
How do I qualify for a credit loan?
To get a credit card loan, you must have a credit card and a good credit score. Only then can you get a credit card loan.
Are credit cards expensive ways to borrow money?
Yes, credit cards can be an expensive way to borrow money. The interest on credit cards varies from bank to bank. They can go as high as 45% per annum for some banks. The interest on a credit card is charged only when you default on your payment. If you pay your bill within the grace period, you need not pay any interest. Credit cards can be a blessing if you use it properly. The reward points, and cashbacks will end up saving you more money than you intend to spend.
How much interest is charged if we withdraw cash from a credit card?
If you withdraw cash from your credit card, you can be charged interest up to 3.5% per month, which is around 42% per annum.
How can I withdraw money from my credit card without charges?
It is impossible to withdraw money from a credit card without charges. However, some banks allow you to withdraw cash without charges up to a certain limit. Check with your bank to see the limit on credit card cash withdrawal without charges.
Written and Reviewed by:
Priyanka Rao is a content strategist for Jupiter.Money, and specializes in writing on topics related to finance, banking, budgeting, salary & wages, and other financial matters. She has a passion for creating engaging content that resonates with audiences across various digital platforms. In her free time, Priyanka enjoys traveling and reading, which allows her to gain new perspectives and inspiration for her work. With a keen eye for detail and a creative mindset, Priyanka is committed to creating content that connects well with her readers, enhancing their digital experiences.
Priyanka Sharma is the Head of Credit Cards (Sr. Director Business & Product - Credit Cards) at Jupiter Money, where she leads the growth and development of the company’s credit card portfolio. She is responsible for driving strategic initiatives and enhancing customer experiences through innovative credit products. Priyanka’s leadership is shaping Jupiter’s approach to simplifying personal finance for its customers.
Prior to her role at Jupiter Money, Priyanka was an Engagement Manager at McKinsey & Company, where she provided strategic advice to clients across various sectors. Her expertise in business strategy, growth, and operations was built on her strong analytical skills and client-focused problem-solving abilities. Earlier in her career, she worked at ZS, a global business consulting firm, where she contributed to various projects, gaining significant experience in data-driven business decisions.
Priyanka holds a Post Graduate Programme in Management with a focus on Finance, Strategy, and Leadership from the Indian School of Business (ISB), where she graduated with distinction, earning a place on the ISB Dean’s List. This prestigious academic achievement underscores her deep understanding of financial strategy and leadership, which she continues to leverage in her fintech leadership role.
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