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Will Taking a Loan on a Credit Card Affect My CIBIL Score?

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Highlights

  • Don’t know how a loan on a credit card will impact your credit score?
  • Read this post that tells you the same along with how it works

A credit card enables so many things for individuals from booking their travel tickets to letting them enjoy the meals of restaurants. Besides, it saves for you with rewards, discounts and cashbacks on your transactions. What if we tell you can get a loan on a credit card? Yes, it’s possible! Lenders offer pre-approved personal loans to their existing credit card shoppers if they have a good credit score, repayment track, high income, etc. As you can see, a credit score prepared by CIBIL and other credit bureaus is one of the factors that enable such a loan. The loan you get will impact your score too. But HOW??

If you care for a good CIBIL score, you should know the same. We will show here the impact of this loan on your CIBIL score. So, read, understand and act accordingly!

How Will the Loan on a Credit Card Impact Your CIBIL Score?

With the loan on a credit card, you will now have two unsecured credits to pay. So, the impact on your CIBIL Score will be immense based on your repayment. Let’s check how.

Repayment

Doesn’t matter which credit you have, the impact on your CIBIL score will depend much on your repayment history. The history will consist of the date of repayment, the loan amount or credit card bill you pay, etc. So, whether your credit score will increase or decrease will depend on debt payment. If you are paying both the loan and credit card bill on time, the score will keep on increasing. But if you skip any of the payments for more than 30 days, the concerned lender will report the same thing to CIBIL. The noted credit bureau will note it and reduce your score by some points. If the delay stretches on, the score can reduce rapidly considering the unsecured nature of credits.

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Credit Mix

Credit mix comes into the picture when you pay more than one debt. Now that you get a loan on a credit card, the number of credit accounts goes up to 2, assuming there was no other debt when you just had a credit card. Ideally, the credit mix should have more secured debts. But even if there are more unsecured credits, you won’t have any problem unless you delay or default on payments. If you commit such a thing, the score can fall rapidly.

Credit Utilization Ratio

You can arrange the required amount to pay the fixed loan EMIs. But the credit card bill will depend much on your shopping habits and needs. This bill amount can fluctuate the way you shop. Even when you don’t have any other debt, you should not consume more than 30% of your credit card limit. Since there’s a personal loan now, you need to spend even more responsibly. In case you utilize more limits, you could struggle to pay either both or any of the two. In any of these cases, your CIBIL score is bound to suffer.

Just as a personal loan EMI remains fixed, you need to fix your credit card shopping limit too. This way, you can pay both with ease and ensure a good CIBIL score. Fixing the limit will require understanding your finances deeply. Curb your outdoor spending as much as you can, avoid some expenses which you feel are unnecessary. You are going to benefit yourself only with a good CIBIL score by doing all these sacrifices.

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Credit Enquiry

Customers don’t need to apply for a loan on a credit card as it comes pre-approved based on a good CIBIL score and healthy income as mentioned above. But even if you have these, you might not get this pre-approved loan. In that case, you may need to apply for it. Once you apply, the lender will do a hard credit enquiry. The score might reduce a bit but will increase at a faster pace with your timely repayment.

But Is a Loan on a Credit Card Any Different from a Regular Personal Loan?

It can be based on how this loan is offered to you. Banks offer a loan on a credit card within or above the credit limit. If the loan is offered within the limit, the applicable EMI will form a part of the credit card bill. Here, the loan amount will be blocked against the credit card limit. But when you get a loan above the credit limit, the loan amount will not be blocked. Here, borrowers will need to pay credit card bills and loan EMIs separately.

Loan on a Credit Card Offers of Different Banks

Almost every top bank offers a loan on a credit card at attractive interest rates and for a flexible repayment tenure. The table below shows the offers of these banks. Take a look!

BanksInterest Rate (In Per Annum)Loan Amount (In INR)Processing Fee Repayment Tenure Turnaround Time 
State Bank of India (SBI)As ApplicableAs Decided by the Bank2% of the loan amount, subject to a minimum and maximum fee of INR 499 and INR 3,000, respectively1-4 YearsThe money gets credited to your account within 48 hours
HDFC BankAround 15%Upto INR 5,00,000Upto INR 700 1-4 YearsThe money can get credited in seconds
ICICI BankStarting from 14.49%Upto INR 10,00,000As ApplicableUpto 5 YearsYou can get the money in 3-4 working days
Axis Bank11.40%-22.20%As Decided by the BankINR 5001-4 YearsAs quickly as possible
YES BANKAs ApplicableUpto INR 2,00,0002% of the loan amount6-24 MonthsThe money will come within 3 days of giving the consent
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Note – The processing fee will also include the Goods and Services Tax (GST), which will also be charged on the interest portion of the loan EMI if this facility comes within the credit card limit.

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HDFC Bank10.75% - 21.45%
ICICI Bank10.75% - 17.50%
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Kotak Bank10.99% - 20.99%
RBL17.50% - 26.00%
Standard Chartered Bank11.00% - 15.00%
Tata Capital10.99% - 19.75%
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Axis Bank7.75% - 8.55%
Bank of Baroda6.85% - 8.25%
Citibank7.13% - 8.03%
HDFC6.90% - 7.65%
ICICI Bank6.90% - 8.05%
Indiabulls Housing Finance Limited8.99%
Kotak Bank6.75% - 8.45%
LIC Housing6.90% - 7.90%
Piramal Capital & Housing Finance9.65%
PNB Housing Finance7.50% - 9.20%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI6.95% - 7.60%
Tata Capital7.50% - 8.75%