Things to Consider When Taking a Loan Against Credit Card


  • Want quick funds with a Loan Against Credit Card?
  • Do consider important factors before applying for this type of loan

The possibility of an individual not needing funds at some point in his or her life is quite low; almost everybody faces financial needs in their lives. To meet financial needs, banks provide several kinds of loans to individuals. But sometimes, the need is so urgent that you can’t wait for the whole documentation, approval, sanctioning, and disbursal process. Instead, you need those funds urgently. Do you know that your credit card can help you in arranging the required funds? Well, you may be surprised to know this but you can get the required loan amount against your credit card.

Almost all banks provide a Loan Against Credit Card which is pre-approved, unsecured, and can be taken without providing any documents. With this facility, an individual can get the required funds instantly in his or her account against the credit card limit. But, there are a few things that an applicant should consider before applying for a loan against credit card. We will be telling you about all of those important things that you must keep in mind before you are going to fulfill your financial needs with a loan against credit card. These factors will help you in making the right decision. So, continue reading!

Things to Keep in Mind While Opting for a Loan Against Credit Card

As we said, a loan against credit card is an amazing banking product that can be taken without pledging any security against it. But there are a few things that an individual should keep in his or her mind to make the right decision. These are Interest Rates, Tenure, Loan Amount, EMI Calculation, Cut in Credit Card spendings, Eligibility, etc. We are telling you about each one of them in detail. Have a look!

Interest Rates on Loan Against Credit Cards

When you opt for a Loan against credit card, you will need to repay the loan amount within the chosen tenure via Equated Monthly Installments (EMI). The EMI amount consists of both principal and interest amount. So, interest rates directly affect your EMI amount. Higher the interest rates on your loan against credit card, higher would be the EMI amount. So, when you choose lower interest rates, you will be paying a lower EMI amount that would be within your repayment capacity. Apart from this, interest rates also depend on your credit score, repayment history, credit card type, etc.

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This is the reason why an applicant should look closely at the interest rates offered by the banks when they are going to opt for a loan against their credit cards. The interest rates on this facility change from one bank to another. For example, if you have an HDFC Credit Card and you want to opt for the loan against it, the interest rates range from 15% to 18% per annum according to the loan scheme you are choosing.

Loan Amount

After choosing the suitable interest rates for yourself, it is important to know what loan amount you can get. While providing the loan against your credit card, lenders give the loan amount after evaluating your credit history and repayment capacity.

The loan amount will be above the cash withdrawal limit of yours and below the overall credit limit. For example, your overall credit card limit is INR 72,000 and the cash withdrawal limit is INR 28,000. According to this, you can get a loan amount ranging between INR 28,000 to INR 72,000 depending upon your past repayment history and monthly income. Depending upon your credit history, some lenders also provide the loan amount over and above your overall credit limit. For example, you can get upto INR 10 lakh with the ICICI Bank Instant Personal Loan against Credit Card while the loan amount will be within your credit limit in the case of HDFC Instant Loan Against Credit Card.

If you are someone who always pays dues on time, you could get a higher loan amount against your credit card as compared to someone who has a bad repayment history. So, you should check with your lender about the loan amount you are eligible for and then make a decision.

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Flexible Tenure

When you are going to opt for a Loan Against Credit Card, you can choose the tenure according to your repayment capacity. The tenure ranges from as low as 6 months to 60 months. You should choose the repayment period carefully as longer tenure increases the overall cost on your loan amount but will make your EMIs lower. The tenure tends to change from one bank to another, so you should check with your credit card provider about the tenure you can choose. We are showing some of the tenures provided by the top lenders below. Please check them.

Bank NameTenure
HDFC Bank12 to 48 months
ICICI BankUpto 60 months
State Bank of India (SBI)12, 24 or 36 months
Kotak Mahindra Bank6 to 48 months
Citi Bank6 to 48 months
Axis Bank12 to 48 months

EMI Calculation

As you know that you will need to repay the loan amount via EMI. That’s why it is important to have an estimate of the EMI amount before you take the loan against Credit Card. This will help you in deciding if the EMI amount will be within your repayment capacity or not. This can be done by using the Loan EMI Calculator where you only need to put a few basic details such as loan amount, tenure (in months) and rate of interest. As soon as you will feed these details, you will get the monthly EMI amount, total interest amount and total amount payable.

For example, if you want to opt for a loan amount of INR 40,000 against your credit card for 24 months. The rate of interest is 14% per annum. On putting these details into the Credit Card EMI Calculator, you will get the EMI amount as INR 1,921. The total interest amount will be INR 6,092 on your principal amount, so you will be paying INR 46,092 as the total amount.

Curb Your Unnecessary Credit Card Spendings

After getting a loan, you should control your credit card spendings as you already have an existing obligation in the form of Loan Against Credit Card. It may be difficult for you to pay both the Loan EMI and Credit card bill together if you spend too much with the plastic instrument. So, if you don’t want to put an extra burden on your repayment capacity, you should avoid unnecessary spending with your credit card. Also, your credit card limit will keep increasing every month as you keep repaying your EMIs.

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Processing Fee

This is one of the important things that you should look at before getting a loan against credit card. Lenders charge a certain processing fee to provide you the loan amount that tends to change from one lender to another. Before choosing a suitable loan, you should check if your lender is providing a low processing fee. In the below table, we are showing you the processing fee of some of the top lenders. Do check them out!

BankProcessing Fee
HDFC BankUpto INR 700 + GST charges
ICICI BankCustomized
State Bank of India (SBI)2% of the Loan Amount plus applicable GST Charges
Minimum: INR 499
Maximum: INR 3,000
Bajaj FinservUpto 2.5% of the loan amount + GST charges
Axis BankSpecified by the Bank

Cash Withdrawal Limits

You also need to remember that some lenders don’t let you withdraw any cash amount from ATMs with your credit card until you don’t pay the loan amount. On the other hand, some lenders do not hold any such restrictions on the customers. Generally speaking, individuals should avoid cash withdrawals from ATMs as the interest starts to charge on the withdrawn amount from the same day you withdraw the amount.

Affect on Your Credit Score in Case of Loan Default

You should remember that in case you miss any of the repayment, your credit score can get affected negatively. So, when you are opting for a loan amount, choose it according to your repayment capacity. This will help you pay both your loan and credit card dues on time and ensure a good credit history.

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Personal Loan Interest Rates December 2023
HDFC Bank10.75% - 14.50%
ICICI Bank10.75% - 19.00%
IndusInd Bank10.25% - 26.00%
Kotak Bank10.99%
RBL14.00% - 23.00%
SMFG India Credit12.00% - 24.00%
Standard Chartered Bank11.49%
Tata Capital10.50% - 24.00%
Home Loan Interest Rates December 2023
Axis Bank8.75% - 9.15%
Bank of Baroda8.50% - 10.60%
Citibank8.75% - 9.15%
HDFC8.50% - 9.40%
ICICI Bank9.00% - 9.85%
Indiabulls Housing Finance Limited8.65%
Kotak Bank8.70%
LIC Housing8.50% - 10.50%
Piramal Capital & Housing Finance10.50%
PNB Housing Finance8.50% - 10.95%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI9.10% - 9.65%
Tata Capital8.95% - 12.00%