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Should Credit Card Users Avail Loans Against Credit Cards? Here are Its Pros and Cons

Since the beginning of this year, the ongoing pandemic-induced lockdown limitations have had a negative impact on the lending activities of the bank. It is inevitable that many people would be laid off, have their salaries reduced, or experience other forms of economic insecurity, resulting in a need for loans to cover financial deficits or liquidity mismatches. While pre-approved digital loans, such as a loan against a credit card, can be useful for existing credit cardholders in order to minimise financial difficulties, they also have their own set of advantages and disadvantages that must be considered before making a final determination.

The following are some advantages and disadvantages to consider before taking out a loan against your credit card after receiving your credit card through icici credit card apply:

Quick Disbursement- Among all credit facilities, loans secured by credit cards are likely to be the most expedient in terms of processing and disbursement. This loan, because it is pre-approved, allows qualifying existing credit cards to benefit from zero documentation, resulting in speedy disbursements within a few hours of icici credit card application. Furthermore, some credit card issuers claim to be able to disburse funds in as little as a few minutes, if not less. Those who are qualified for the loan only need to complete an online application through internet banking or contact the credit card issuer’s customer service support team for assistance. It is possible to have the loan amount instantly credited to your account or to have it delivered to you by demand draught.

It serves as a viable alternative to other financing alternatives- Credit card loans are a good source of credit in any situation, but they are particularly useful in situations such as the ongoing pandemic-induced lockdown, restrictions, limited working staff and hours for lenders, and economic uncertainty. Credit card loans have several advantages, including one of the quickest disbursements, pre-approval status, and the ease with which loan applications can be submitted online or through phone banking channels. In the event of a financial shortfall, liquidity mismatch, or debt consolidation, existing credit cardholders who are ineligible or have failed to qualify for other loan options by apply for a credit card loan through icici credit card apply, if they are eligible. Nonetheless, before selecting a lender or loan alternative, make sure to compare them on several aspects such as interest rate, loan term, processing fee and amount of loan you are considering.

Loans with repayment terms of up to 5 years are available- The availability of loan terms ranging from 6 months to 5 years gives the borrower the choice to choose a loan term with a repayment term whose accompanying EMIs are comfortable to pay back over time. When deciding on a loan term, keep in mind that while longer terms result in lower monthly payments, they also result in a higher overall interest expense. As a result, it’s a good idea to choose a loan term that corresponds to your repayment capacity. Due to the fact that your loan EMI will be combined with your credit card account, failure to pay your credit card bill in full on time will result in high financial costs in the form of hefty credit card interest rates, as well as a late payment fee.

Cons

Interest rates higher than a personal loan– The credit card interest rates on a loan are determined by characteristics such as your credit score, credit card type, repayment history, employer, and employment profile, among others. In most cases, the interest rates on your credit card loan are at least 1 percent higher than the interest rates on personal loans available to people with the same credit profile; however, credit card issuers may charge even higher credit card interest rates during uncertain economic conditions such as the current one. Consequently, existing credit cardholders with multiple credit cards should ensure that they compare the interest rates offered by both their existing credit cards and any other loan options such as digital top-up home loans, instant personal loans, or COVID 19 specific personal loans that may be available from other lenders.

Because a loan against a credit card can only be obtained up to a predetermined limit sanctioned by the credit card issuer, when a loan against a credit card is obtained, the credit limit of the credit cardholder is temporarily blocked up to the loan amount, preventing the cardholder from making credit card purchases in the future.

However, as you continue to pay your loan EMIs, the loan limit will progressively be released. Furthermore, certain credit card issuers may give this loan in addition to and above your available credit limit on the card, which helps to keep your credit limit intact and allows you to continue making your regular credit card purchases while maintaining your credit limit. Nonetheless, keep in mind that a credit card issuer would only offer this option after taking into account factors such as your repaying capacity and historical repayment behaviour, among others.

Impacts your cash withdrawal limit- Just as with credit limitations, cash withdrawals through a credit card are also permitted up to a predetermined limit, which is often a portion of your overall credit limit, unless otherwise indicated. Some credit card issuers totally block the entire cash withdrawal limit when a loan against a credit card is obtained, whereas others do not completely block the entire cash withdrawal limit. Although making ATM withdrawals using a credit card should be avoided to the greatest extent feasible due to the fact that it incurs both cash withdrawal fees as well as high finance costs in the form of high credit card interest rates, having that alternative available may be beneficial in dealing with financial difficulties.

Conclusion

The advantages and characteristics of going for an icici credit card apply and then taking an available loan against a credit card unquestionably make them one of the most advantageous credit sources, particularly in difficult economic times such as the current pandemic, which involves economic uncertainty, limited working hours, and a scarcity of available staff for lenders. To be safe, it’s best to look into other loan possibilities first, such as digital immediate personal loans, COVID 19 specialised personal loans, and digital top-up house loans, if they are feasible. Not only can these loans be disbursed in the same amount of time as credit card loans, but they may also carry lower interest rates than credit card interest rates on the loans.

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