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Loan on Credit Card: A quick personal loan without documents

- Loan on credit card, which is nothing but a personal loan, but without the usual documentation and delays associated with a personal loan. Loan on credit card is different from the typical cash withdrawal facility that all credit cards have.

Basha Shaikh

11 Sep 2007

What will you do if you need money really quick and your cash requirement is higher than your cash withdrawal limit on your credit card? Even the fastest personal loan disbursal would take anywhere between 5-10 days, but you need the cash as fast as possible. And also you do not have time to go through the cumbersome documentation.

Try for a loan on your credit card. Many credit card issuing banks now offer 'loan on credit card', which is nothing but a personal loan, but without the usual documentation and delays associated with a personal loan.

Loans on credit cards are different from the typical cash withdrawal facility that all credit cards have. You can take a loan on credit card for interest rate that is on par or slightly higher than a personal loan (18%-22%), while interest rate for cash withdrawal on credit card would be in the region of 25% to 40%. Some banks also provide you a higher loan amount than the 'cash withdrawal limit' on your credit card.

However, loan on credit card may not be available for everyone. Banks provide this loan to credit card customers with high credit standing. That means if you have been using a particular bank's credit card for some time and you have a good payment track record, then you are most likely to be eligible for a loan on credit card.

Many banks like HDFC Bank, ICICI Bank and Standard Chartered offer 'loans on credit cards. You can call up your credit card issuing banks customer care centre and check it they offer 'loan or credit card' and if yes, whether you are eligible and what is the maximum amount that you can take as a loan. The maximum amount and your eligibility for loan on credit card you can get are dependent on your repayment history, your credit limit and the type of card you have. Your payment track record as a credit card holder is scrutinized by the bank when you apply for a loan on credit card.

How do banks make disbursement for loan on credit card? The loan amount is usually disbursed to the card holder through a demand draft or money transferred directly to the bank account.

Some banks limit or block the cash withdrawal on your credit card to the extent of loan you have taken. For the rest, loan on credit card works like a  personal loan - with a processing fee, repayment in monthly installments and prepayment facility, but often with a hefty pre-payment charge.