TAKING A LOAN AGAINST CREDIT CARD: 5 THINGS YOU MUST KNOW
Money is the call of the day. It is impossible to run our day-to-day activities without considering money. A scarcity of money is the worst situation one would never be one to face. But such conditions do come around, where you might have a requirement to fulfil or execute and you need financial strength in that regard. That’s when you give yourself the thought of borrowing a loan. This instant monetary help will provide you with a significant boost in your prospects.
A credit card happens to be a tool with which you can gather these kinds of loans. You can use it for buying something or other necessary transactions. The money that you spend gets added to your credit balance. You have to pay back this money to the bank or other financial lending institution you are using the credit card of, with a stipulated interest. There is a specified period within which you have to pay back the loan. The part varies from banks to financial institutions, with natural interests ranging from 35 to 40%
However, have you ever thought about the various intricacies concerning taking loans via credit cards? If not, then this article is what you need to read. We will tell you all the necessary points, and you cannot overlook them while taking a loan via a credit card.
1. SIDE EFFECTS OF LATE PAYMENTS:
Let us say that you have applied for a loan. If you are inconsistent with paying back the loans, that can adversely affect your application. Or if you are using your credit card frequently without having any concern about repaying the money, that will harm your prospects. Indulging in late payments can adversely affect your chances of getting a top-up loan.
Though many banks and financial institutions provide a top-up loan to their credit cardholders, it is necessary to have a clean credit card history of making things smooth. Late payments of credit card bills will hamper your wishes for a loan in the future. That’s why even experts emphasize this aspect.
2. EFFECTS OF MAKING DEFAULT IN YOUR PAYMENT:
A default in your payment refers to your loan default and not your credit card default. A significant difference lies between defaults on credit card repayments and that of defaults in loan repayments.
A credit card default will have a significant impact on your credit score. However, a default on loan against your credit card is under the purview of loan defaults, and that will harm your future loan prospects.
3. CHARGES FOR PROCESSING:
While taking a loan against your credit card, there will be a processing charge attached to this particular function. It depends on the loan amount approved. Usually, the processing charge ranges from 1 to 5%.
4. THE INTEREST LEVIED ON TRANSACTIONS VIA CREDIT CARDS:
There is an associated amount which is the interest for your loan amount against the credit cards. When you repay your loan, this interest is an added amount that you will have to repay.
Let us say you have applied for a loan of around 70% of your credit card amount. Then the remaining amount becomes the interest you will have to bear. If you forget to or are unable to repay the loan within the stipulated time, a claim of around 35% per annum is applicable.
5. THE OPTION OF PRE-CLOSING YOUR LOAN:
Any individual can pre-close their loan before the expiry period of the card. You can do it in your case as well. As the experts say, if you pre-close your loan, it is unnecessary to inform the bank or the financial institution you are lending. But there are some pre-closure charges that the lender organization levies.
We hope that we could give you insightful information concerning credit card loans. Next time, you apply for a loan or go for a top-up, then make sure that you keep the above points in mind. It will help you prevent unfavorable circumstances.
- The number of credit cardholders in India amounted to 57.4 million as of April 2020.
- There are 5715 credit card defaulters in India.
- India saw nearly Rs. 25,000 crore wilful defaulter cases as of 14th July 2020.
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