Instant flush of liquidity, reward points for availing discounts on future purchases and a financial ally in an emergency, credit cards enjoy multiple advantages. However, do you know that credit cards can also be effective for short-term financing as you can avail a loan on your card, within the credit limit. Read on to know the various aspects of a loan on credit card and find out whether you should opt for it or not.
- An unsecured mode of finance
Loan on credit cards is an unsecured mode of finance. It means you don’t have to pledge any collateral as security for availing it. This is one of its primary advantages as not everybody can pledge an asset as collateral. Also, many borrowers may not be comfortable with the idea of pledging collateral for availing a loan.
- No need to submit any extra documentation
While availing a loan on your credit card, there’s no need to submit any extra documentation to the financial institution as you already own its active card. Generally, while availing a fresh loan, you need to submit documents related to your income, address and identity among others. Sometimes, you might need to submit documents related to your tax returns and bank statement.
However, there isn’t the need to submit extra documents while availing loan on your credit card as all the essential documents are already with the financial institution.
- Quick approval and disbursal of loan
In an emergency, it’s not only the availability of funds but also the time taken for disbursal that matters. When you apply for a loan on your credit card, the approval process is quick and fast. In some cases, all you need to do is to call up the customer care of the financial institution whose card you own, and the money typically gets credited to your account within a few hours.
As no extra documentation is required and you needn’t go through all the processes associated with availing a fresh loan, loan disbursal is quick and prompt. This comes handy during a contingency.
- Competitive interest rates
On most occasions, loans availed on credit cards have a competitive interest rate. Sometimes, it may be even lower than a fresh loan of the same amount from the same institution. As the lender already knows your borrowing behaviour, you can avail the loan at a competitive interest rate. Also, you might get an option to repay the loan as per your convenience through flexible EMIs.
Credit cards offering emergency personal loan
Modern credit cards such as the Bajaj Finserv RBL Bank SuperCard allow you to convert the credit limit into an emergency personal loan and get interest-free cash for up to 90 days. Not only this, you can also repay the loan in 3 easy EMIs.
Thus, a loan on credit card is a convenient way to meet the requirement of funds at short notice. Not only is it collateral-free, but also quick and easy.