Are loans against a credit card right for you? Here’s what to know!

Ever face a situation where you urgently need cash but your paycheque seems miles away? The same happened with Mohit recently. His car needed an unexpected repair, leaving a dent in his wallet. With an upcoming rent payment looming, he needs funds instantly.

This is where a loan against a credit card became a lifesaver.

Let’s explore how this service works and how it can help you get an instant loan.

What is a loan against a credit card?
 

A loan against a credit card, also known as a credit card loan, allows you to borrow money instantly against your available credit limit. It converts a portion of your credit limit into a loan with a fixed repayment schedule. This facility can be a lifesaver when you need immediate funds and don’t have the time or resources for a traditional loan application process.

IDFC FIRST Bank and your instant loan needs
 

IDFC FIRST Bank recognises that unexpected situations can arise. That’s why they offer credit cards with the convenient option of a loan against your credit limit. The application process is quick and hassle-free, allowing you to access funds instantly within minutes of approval.

Benefits of loan against a credit card
 

A credit card loan has several advantages that can be a lifesaver in unexpected situations. Here’s how it can benefit you –

• Get cash in a flash

Unlike traditional loans that take days or weeks to get approved, a loan against a credit card can be available instantly. Many credit card issuers provide pre-approved loans. So you can get the funds without lengthy application processes!

• Ditch the hassles

Since the bank already has your information on file, minimal documentation is required. It saves time, allowing you to focus on what matters most—resolving your emergency.

• Borrow based on your credit habits

The more responsibly you’ve used your credit card, the higher your credit limit might be. It could lead to a larger loan amount when you need it. Think of it as a reward for good financial habits!

• Put your unused credit limit to work

Is your credit limit just sitting there, unused? A loan against a credit card lets you tap into that unused credit and convert it into a loan with a fixed repayment plan. It’s like giving your credit limit a new job – helping you in a pinch!

• Get flexible repayment options that fit your budget

A credit card loan comes with the flexible repayment option of EMI. You can choose a repayment term that fits your budget and financial situation, making it easier to manage your repayments comfortably.

• Save money on interest

A loan against a credit card has a much lower interest rate than regular credit card withdrawals. Thus, it can save you money in interest charges in the long run.

• Get a loan without collateral

Unlike other loans, you don’t need to put up your car or house as security for borrowing against a credit card. The loan is based on your creditworthiness and your existing credit limit, making it a more accessible option compared to traditional loans.

So, the next time you’re faced with an unexpected expense, a loan against a credit card can be a quick, convenient, and affordable way to bridge the gap.

Factors to consider before getting a credit card loan
 

Taking a loan against a credit card can be a lifesaver in a pinch, but let’s hit pause for a quick check-in. Here are some factors you should consider to determine if it's the right move for you –

• What are the interest rates?

The interest rates can pack a punch compared to other loans. Knowing the rate upfront helps you plan your budget and avoid surprises. Can you comfortably repay the loan with interest?

• How is the credit utilisation ratio affected?

A loan against a credit card increases your credit utilisation ratio, which is the percentage of your credit limit you’re using. A high credit utilisation ratio can negatively impact your credit score.

• Watch out for extra fees

Watch out for any hidden charges, like processing fees or penalties. These can add up and make the loan more expensive. Factor them in when calculating the total cost.

• Are there better options?

Shop around! Consider personal loans or borrowing from other sources, like family or friends. They might offer better terms and lower interest rates. Comparing options helps you choose the smartest financial solution for your situation.

These factors can help you decide whether a loan against a credit card is right for you.

Risks of loan against a credit card
 

Borrowing against your credit card can be a double-edged sword! Here’s why –

• Double trouble on cash

Using a loan against a credit card limits your ability to withdraw cash directly from ATMs. It can be a pain if you need to withdraw some money for emergencies.

• Interest rates can bite

Interest rates on these loans can be higher than those on other options, like personal loans. It means you will pay more on top of what you borrow.

• Your spending power takes a hit

Using your credit card for a loan shrinks the limit available for regular purchases, which means you might not have enough credit for other needs. Don’t max out your card—leave some breathing room for everyday spending.

• Debt trap?

The easy access to cash can be tempting. If you’re not careful, you could easily fall into a debt trap where you’re constantly borrowing to pay off old loans.

Tips for responsible usage of credit card loans
 

Here are some tips that you can practise to avoid the pitfalls and make a loan against a credit card work for you

• Consider the loan only for emergencies, not everyday purchases
• Check and compare interest rates with other loan options before borrowing
• Only borrow what you can realistically repay within the loan term
• Factor in any processing fees associated with the credit card loan
• Don’t treat the loan access as an excuse to max out your credit card limit
• Plan a budget to ensure on-time monthly repayments for the loan and your regular credit card balance
• Set up automatic repayments to avoid late fees and damage to your credit score

Why IDFC FIRST Bank Credit Cards?
 

You can get a pre-approved loan, or QuickCash, with your IDFC FIRST Bank Credit Card. With QuickCash, funds are transferred instantly to your bank account with zero paperwork. It offers the flexibility to pay in EMIs ranging from 3 to 48 months with interest rates starting from 1% p.m. Click here to avail now or call on 1800 10 888.

Here are some reasons to consider getting an IDFC FIRST Bank Credit Card:

• A slew of lifetime-free credit cards
• Lower interest rates starting at 9%
• 0% interest on cash withdrawals up to 48 days from withdrawal
• Travel benefits
• Never-expiring credit card reward points
• Cashback offers
• Quick cash loans
• Secure transactions with features like tokenization and two-factor authentication

Instant funds at your fingertips!
 

A loan against a credit card catches you when you need it most and allows you to access funds instantly during financial emergencies. But responsible use is key. Hence, understand the benefits, risks, and factors before choosing this option. With the IDFC FIRST Bank Credit Card, you're not just getting instant access to funds; you’re gaining peace of mind.

So, the next time you face an urgent expense, remember that the solution might be closer than you think.