The approximate 5:118 ratio of credit card to debit card holders in India is mainly because most individuals believe the former is a debt trap. However, the truth is credit cards are the ideal instruments to make transactions. The rewards and benefits offered by these cards are unparalleled when compared to debit cards.
Not only rewards but credit cards also offer concierge services, priority check-in at airports, car rental insurance, accidental death insurance, baggage delay insurance, baggage loss/damage insurance, price protection coverage, and much more.
One of the other lesser-known features is a personal loan on credit cards. This facility enables you to convert your unused credit limit into a loan during emergencies.
3 Tips to Get a Small Personal Loan on Credit Cards
1. Clear Your Outstanding Dues Before You Apply for the Loan
Your CBIL score will drop if you possess outstanding dues on your card. The card provider may deny you the loan if your credit score is not satisfactory.
Hence, it is best to clear all such dues and improve your CIBIL score before you apply for an emergency personal loan. Doing so increases your chances of loan approval.
Also, check if this feature is available with your card before applying as not all financial institutions provide a personal loan on credit cards. For example, you can go for the Bajaj Finserv RBL Bank SuperCard which comes with similar industry-first features and benefits.
2. Make Sure the EMIs Don’t Incur Interest
While most financial companies charge interest on the loan, certain leading lenders may not. Generally, your loan remains interest-free for a certain period.
For instance, the emergency personal loan that you avail against your Bajaj Finserv RBL Bank SuperCard is free of interest for up to 90 days. You can repay the loan in 3 easy EMIs only with a small processing fee.
Bajaj Finserv also provides pre-approved offers which reduce the time of availing these credit cards by ensuring a simplified and hassle-free process. Such schemes furthermore come with personal loans, home loans, business loans, and several other financial products and services. You can check your pre-approved offer by providing only your name and phone number.
3. Reduce Your Credit Utilization Ratio Before You Apply
The lower your credit utilization ratio is, the higher will be the amount you receive. It is the ratio between your available and utilized credit limit.
So, pay your full outstanding dues to increase your available credit limit. This can increase the loan amount you can avail. Hence, it is best that you clear all your credit card dues before you apply for a personal loan.
How Does Repayment of Loan on Credit Cards Work?
You need to pay EMIs every month to restore the credit limit of your card.
Say, for example, your current available limit after taking the loan is Rs. 10,000 and the EMIs on your loan are Rs. 5,000.
Your credit limit will become Rs. 15,000 after you pay the first EMIs. Subsequently, it will be restored after paying all the EMIs.
Also, you may opt to part pre-pay or foreclose the loan if you have a surplus. Pre-payment enables you to pay a large portion of your loan principal whereas foreclosing lets you close the total loan before the tenor ends. You may have to pay a nominal fee to avail such facilities. However, some financial institutions also provide these services without any additional cost.
Also Read: Top 9 Reasons Why People Apply for a Personal Loan in India
When to Take a Loan on Credit Cards?
Scenario 1:
Take, for example, a medical emergency. You may need to deposit money in cash if the vendor refuses to accept credit cards for transactions.
Even if the vendor accepts credit cards, you will attract charges or penalties if you fail to repay the outstanding dues, in case it is a large amount. Furthermore, you may also have to pay late payment fees on the same. Not only does your debt increase even more, but your credit score also starts to fall.
Hence, taking a personal loan against the unused limit of your credit card can eliminate the need to pay interest and also keep your CIBIL score intact.
Scenario 2:
Another situation where a loan can come to your rescue is when suppliers require an advance. You may not have the funds to pay them, and they also might not accept cards.
There can be numerous other scenarios where availing a loan becomes essential due to instant cash requirements.
Generally, leading financial institutions don’t need documents when you apply for a small personal loan on a credit card, unlike traditional loans. The tenors on these may also extend up to 60 months. So, follow the above-mentioned tips and avail a personal loan without any difficulty.
