| Overview: Learn how to leverage your existing credit card for quick loans with lower interest rates than cash advances. Understand eligibility criteria, the application process, and repayment options to make informed financial decisions during emergencies or planned expenses. |
Quick Access to Funds When You Need Them Most
Unexpected expenses don’t wait for payday. Whether it’s a medical emergency, home repair, or bridging a financial gap, a loan against a credit card offers a practical solution for immediate funding needs.
Unlike traditional loans that require extensive documentation and long approval times, these loans leverage your existing credit limit to provide quick access to funds at competitive interest rates. This guide explains how to use this financial tool effectively while maintaining healthy credit habits.
What is a loan against a credit card?
A loan against a credit card allows you to borrow money based on your available credit limit, but with better terms than cash withdrawals. This facility converts a portion of your credit limit into a fixed loan amount with structured EMI repayments.
Key Differences from Cash Advances
Cash advances typically charge 2.5-3.5% monthly interest, while loans against credit card options offer annual rates starting from 12-18%. The repayment structure also differs significantly:
- Cash Advances: Full amount due with next billing cycle.
- Loan Against Credit Card: Fixed EMIs over 6-60 months.
- Processing Fees: Usually lower for pre-approved loan offers.
Most major banks offer this facility to existing cardholders with good repayment history. The loan amount typically ranges from ₹10,000 to 80% of your available credit limit.
Eligibility and Application Process
Your eligibility for a loan against a credit card depends on several factors that banks evaluate to minimise risk.
Primary Eligibility Criteria
- Credit Score: Minimum 650, though 750+ gets better rates.
- Credit Utilisation: Should be below 30% of total limit.
- Payment History: No missed payments in the last 6 months.
- Card Age: Minimum 6-12 months of active usage.
Simple Application Steps
- Check pre-approved offers in your credit card statement or mobile app.
- Select a loan amount within your eligible limit.
- Choose a repayment tenure based on your budget.
- Submit the application through net banking or the mobile app.
- Get instant approval and funds disbursed within 24 hours.
Building a strong credit score improves your chances of approval and better interest rates.
Interest Rates and Cost Analysis
Understanding the complete cost structure helps you make informed borrowing decisions.
| Loan Type | Interest Rate | Processing Fee | Approval Time |
| Loan against credit card | 12-24% annually | ₹99-₹999 | Instant to 24 hours |
| Personal loan | 10-22% annually | 1-3% of loan amount | 2-7 days |
| Cash advance | 30-42% annually | 2.5% of amount | Immediate |
Sample Cost Calculation
For a ₹50,000 loan against a credit card at 18% annual interest for 12 months:
- Monthly EMI: ₹4,589
- Total interest: ₹5,068
- Processing fee: ₹500 (approximate)
- Total cost: ₹55,568
This is significantly lower than cash advance costs, which could exceed ₹65,000 for the same amount.
| Tip: Check your credit card statement for pre-approved loan against credit card offers to access quick funds at competitive interest rates. |
Smart Repayment Strategies
Effective repayment planning prevents debt accumulation and protects your credit score.
Choose the Right Tenure
- Shorter Tenure (6-12 months): Higher EMI but lower total interest.
- Longer Tenure (24-36 months): Lower EMI but higher total cost.
- Medium Tenure (12-24 months): Balance between affordability and cost.
Prepayment Benefits
Most lenders allow prepayment without penalties after 6 months. Use bonuses, tax refunds, or surplus income to reduce the outstanding amount and save on interest costs.
A loan against a credit card works best for short-term funding needs with predictable repayment capacity. It offers faster processing than traditional loans while maintaining lower costs than cash advances.
You might even find services from providers like Airtel Finance that offer similar quick-access solutions. However, consider your overall debt-to-income ratio and avoid borrowing beyond your repayment capacity. For larger amounts or longer tenures, compare with personal loan options. The key is choosing the right financial product based on your specific needs, timeline, and repayment ability.
FAQs
1. What documents are needed for a loan against a credit card?
No additional documents are typically required, as banks use your existing credit card data and transaction history for approval.
2. How does this differ from a cash advance?
Loans against credit cards offer lower interest rates (12-24% annually) and structured EMI repayments versus cash advances with higher rates (30-42% annually).
3. Can I get a loan against a credit card with a low credit score?
Most banks require a minimum credit score of 650, though some may consider applicants with scores above 600 for smaller amounts.
4. What happens to my credit limit during the loan tenure?
Your available credit limit reduces by the loan amount until you repay it, affecting your credit utilisation ratio.
5. Are there any prepayment charges for early closure?
Most lenders allow prepayment without penalties after 6 months, but check your specific loan terms before applying.
