What is a Credit Card Loan and How to Get One?

Did the concept of a credit card loan ever make you curious? According to a report, credit card payments by Indian users increased by 27.9% in 2023. This figure is expected to grow by 54.2 times by the end of 2025.

Loans against credit cards offer flexible financing options, allowing you to borrow up to your approved limit. You can use this during a financial emergency or to access instant funds for daily expenses. The best part is that you do not need to go through elaborate paperwork for loan approval.

Quick Overview 

• Credit card loans let you borrow instantly without lengthy paperwork.
• Loans on credit cards offer quick fund transfers and flexible tenures, but come with higher interest.
• Eligibility depends on repayment history, stressing the need for responsible financial management.

What is a Credit Card Loan? 

When you apply for a loan against your credit card, it basically means that you are willing to borrow money against the card’s limit. Regular loans are not the same as a credit card loan, as they involve a longer approval process.

You can get a credit card loan based on your credit score, repayment record and previous card usage. In other words, you could say that it functions like a pre-approved loan.

How Does a Credit Card Loan Work? 

As soon as you avail a credit card loan, you partially borrow from your existing card limit. However, instead of spending that amount on a merchant platform, you withdraw it as cash for personal expenses. 

Here you can have a brief overview to understand how it works: 

Step 1: Verify Whether You are Eligible 

To start with, check if your credit card offers any loan facilities. If it does, then verify whether you have enough available credit to take out a loan.

Step 2: Understand the Borrowing Charges

Whenever you borrow on a credit card, you will be charged a fee and this is not the same as the applicable interest rates. Thus, you should be aware of these charges. 

Step 3: Collect the Funds

Once your credit card loan is approved, either transfer the amount to your bank account or withdraw cash from a nearby ATM.

If you are currently ineligible for a credit card due to an insufficient credit score, consider getting a credit card backed by an FD from Stable Money. With these cards, you can enjoy 0.5% cashback and get exclusive offers on select brands. 

How to Apply for a Loan on Your Credit Card? 

You can get pre-approved credit card loans up to ₹15 lakh from leading banks like Axis Bank for a term of 12-48 months. Depending on your credit card issuer, you can apply online by visiting their official website. Alternatively, you can visit the branch and apply offline as well.

Here are the steps to apply for a credit card loan online:

Step 1: Log in to your net banking account. 

Step 2: Select your card and then apply for a loan.

Step 3: Fill out the form and provide the necessary soft copies (if required). 

Your credit card issuer will check the details and let you know whether the loan can be disbursed within 2-15 working days. 

Advantages of Credit Card Loans 

A recent CIBIL report shows that almost 57% of Indians regularly monitor their credit scores to access better credit options. With that in mind, you can get a credit card loan and enjoy these benefits:

• Direct Fund Transfer: The requested amount is swiftly transferred to your account. It ensures seamless utilisation of funds. 
• Favourable Rates: Customers typically experience competitive credit card loan interest rates. Therefore, you can rely on them during emergencies. 
• Hassle-free Application: You can complete the loan application procedure within a few minutes on your smartphone. 
• Extended Tenure: A credit card loan is typically sanctioned for durations of up to 24 or 48 months. Hence, you get a reasonable repayment period. 

Things to Consider Before Applying for a Credit Card Loan 

• High Interest Rates: Typically, the loans will be disbursed at a greater interest rate compared to secured loans. So, you should carefully borrow to avoid any extra credit card debt. 
• Credit Score Impact: Not meeting timely credit card loan payments will hamper your CIBIL score and negatively impact future loan opportunities. 
• Financial Assessment: Ensure to review your financial position to accurately assess repaying potential. 

Final Word

A credit card loan allows you to access pre-approved loan offers. These arrangements do not involve complex paperwork and can be repaid as flexible EMIs. As a result, you may want to consider this loan to cover your unavoidable expenses during an emergency.