Questions On Credit Card Loans

A Credit Card Loan is a financial facility that lets you borrow cash against credit limits. While Credit Cards help make purchases, a Credit Card Loan helps you get immediate cash, like a Short-Term Loan. However, if you do not know much about this facility, fret not. Here are commonly asked questions on Credit Card Loans answered for your understanding.

What are the eligibility requirements for a Credit Card Loan?

When you apply for a Credit Card, you come across certain eligibility requirements. The same goes for a Credit Card Loan. This includes:

• A good credit score
• A stable income source
• Credit Cards with a reasonable credit limit
• Repayment history

What are the interest rates for a Credit Card Loan?

The interest rate for such a Loan is usually higher than other Loans due to its unsecured nature. Banks may charge an interest rate ranging from 10% to 36% per annum. This also depends on your creditworthiness and the bank's policies.

Are there any processing fees involved?

Yes, banks charge a processing fee for the Loan. This usually ranges from 1% to 3% of the Loan amount. This fee is non-refundable and deducted from the Loan amount disbursed to the individual.

What is the tenure for such Loans?

The tenure for Loans against Credit Cards is usually shorter than other Loans. Banks may offer up to 36 months of tenure for this Loan. However, depending on the Loan amount, it may vary between banks.

How to repay a Credit Card Loan?

You can usually repay the Loan through Equated Monthly Instalments. The EMI amount is calculated according to the Loan amount, interest rate, and tenure. You can repay the Loan according to post-dated cheques or auto-debit from your Bank Account. Check this aspect when comparing Credit Card interest rates.

What is the Loan amount granted?

Banks may offer Loans up to 80% of the available credit limit on your Credit Card. However, the Loan amount can vary between banks and may also depend on your creditworthiness.

What are the prepayment and foreclosure obligations?

You can prepay or foreclose your Loan. However, banks may charge a prepayment or foreclosure fee ranging anywhere from 2% to 5% of the outstanding Loan amount.

How is the Loan amount disbursed?

The Loan amount for a Credit Card Loan is usually disbursed directly to your Credit Card.  This account is opened when you apply for the Credit Card. You can then use your card to make purchases or withdraw cash.

How does a Credit Card Loan repayment influence your credit scores?

The repayment of the Loan can significantly impact your overall credit score. For example, timely payment of EMIs can improve the credit score. However, defaulting on payments can negatively impact the credit score.

Conclusion

A Credit Card Loan provides access to cash advances. The listed questions are intended to shed more light on it for your understanding.