How to Take a Loan on a Credit Card and Its Benefits
In today’s fast-paced financial environment, credit cards have become more than just tools for shopping—they also offer convenient short-term loans. Credit card loans are one of the easiest and fastest ways to access funds without extensive paperwork or waiting times. Many people are unaware that their credit card can act like an emergency loan provider when used wisely. In this article, we will explore how to take a loan on a credit card, who can avail of it, and what benefits it offers.
What is a Credit Card Loan?
A credit card loan is a type of pre-approved personal loan offered by your credit card issuer. It is given against your available credit limit or as a separate loan without affecting your existing credit limit. The process is usually quick and involves minimal documentation because the bank already has your credit history and personal details.
How to Take a Loan on a Credit Card
1. Check Eligibility
Before applying, check whether you are eligible for a credit card loan. Most banks notify eligible customers through SMS, email, mobile banking apps, or even on the monthly credit card statement. If you’re not sure, you can call customer care or log in to your net banking account to check.
2. Understand the Loan Offer
There are two types of credit card loans:
Within Credit Limit: The loan is given from your existing unused credit limit. For example, if your credit limit is ₹1,00,000 and you’ve used ₹40,000, then the bank can offer a loan of up to ₹60,000.
Over and Above Credit Limit: Some banks offer a separate loan without affecting your card's available credit. This is usually based on your repayment history and credit score.
3. Apply for the Loan
If you are eligible and wish to take the loan:
Visit your bank’s mobile app or website
Go to the credit card section and look for “Loan on Credit Card” or “Insta Loan”
Choose the amount, tenure (usually 6 to 48 months), and review the interest rate
Submit the request and accept the terms
Some banks also allow customers to apply via customer care calls, SMS codes, or directly at the nearest branch.
4. Receive Funds
Once approved, the loan amount is either:
Transferred directly to your bank account
Converted from your credit card spending into EMIs
Credited as a demand draft or cheque depending on your preference
Key Benefits of Taking a Loan on a Credit Card
1. Instant Approval
Unlike traditional personal loans, credit card loans are pre-approved. There’s no need for documentation, guarantors, or long waiting periods. Funds are usually disbursed within a few hours to a couple of days.
2. Minimal Documentation
Since the bank already knows your credit history, identity, and income, you don’t need to submit extra papers. The process is 100% digital for most major banks.
3. Flexible Repayment Tenure
You can repay the loan in EMIs over 6, 12, 24, or even 48 months. Some banks allow early closure of the loan with little or no foreclosure charges.
4. No Collateral Needed
A credit card loan is unsecured, meaning you don’t need to pledge any property or assets. This is helpful for salaried individuals or students who do not own significant assets.
5. Attractive Interest Rates
Compared to regular credit card interest (which can be as high as 36%-42% annually), credit card loans offer much lower interest rates—sometimes starting as low as 12%-18% per annum.
6. Convert Purchases into EMIs
Some credit card issuers allow you to convert high-value purchases into loans instantly. For example, if you buy a phone for ₹50,000, you can turn it into 12-month EMIs with nominal interest or even 0% EMI during offers.
7. Improves Credit Score (if managed well)
Timely repayment of your loan EMIs boosts your credit score and strengthens your credit profile. This can help you qualify for bigger loans in the future.
Things to Keep in Mind
Interest Rate: Always compare rates before applying. Though lower than standard card interest, it is still higher than home or education loans.
Hidden Charges: Look out for processing fees, foreclosure charges, and late payment penalties.
Credit Limit Impact: If the loan is taken within your credit limit, your available spending limit will reduce accordingly.
Repayment Discipline: Missing EMIs can lead to high penalty charges and negatively affect your credit score.
