Loan Against Credit Card: Eligibility, Interest Rates, and Application Process
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You should consider it for short-term needs like medical emergencies, home repairs, travel expenses, or other cashflow requirements during emergencies.
There is no single best option; it depends on your needs. You should compare offerings based on the interest rates, processing fees, loan tenure, and pre-approved eligibility. Select one that suits your needs.
Use your bank's mobile banking app or net banking platform. Under the credit card section, you can select the loan offer, amount, repayment option, and submit your application.
Many banks provide instant loans against credit cards. However, the applicable interest rates depend on your credit profile, repayment history, and card type. Please check pre-approved offers through your bank's mobile app.
Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein
If you are facing an emergency and looking for funds, read this guide to understand how to apply for a loan against a credit card, along with eligibility, interest rates, fees, and other important factors to consider before borrowing.
How to Apply for Loan Against Credit Card?
The process is straightforward. You can apply for a loan on a credit card in the following ways:
Mobile Banking
Log in to your bank's mobile banking application and navigate to the credit card or loan section. Select the ‘Loan Against Credit Card’ option, enter the required loan amount and your preferred tenure, and confirm the application. On approval, the funds are typically credited to your linked account within a few hours.
Customer Care
If you are not comfortable applying online, you can also apply through customer care. Call the bank’s helpline number. A representative will explain the available loan offers, verify your details, and guide you through the application process.
Pre-approved Loan Offers
Banks often provide pre-approved loan offers to select customers based on factors such as repayment history, card usage, and overall credit profile.
If you already have a pre-approved offer from Kotak Mahindra Bank, you can usually check it through the mobile banking app and apply in just a few steps.
Eligibility Criteria for Credit Card Loan
Eligibility depends on your relationship with the Bank, along with the following factors:
The exact eligibility conditions can differ across banks and card variants. It is always better to check directly with your bank for the applicable terms and available offers.
Documents for Loan Against Credit Card
The good news is that minimal to no documentation is usually required. If you are already an existing customer, the bank uses your existing KYC data. You will need access to your registered mobile number for verification.
Interest Rates and Charges on Credit Card Loans
Understanding the cost of borrowing is important before applying for a credit card loan. Here is a general overview of the charges involved:
Charge Type
Typical Range
Interest Rate
12% – 25% per annum
Processing Fee
May vary
Foreclosure Charges
2% of the outstanding amount
Late Payment Fee
As applicable per card terms
Note: Rates and charges vary by bank and credit card product. Please refer to your bank’s website or contact customer care for the current applicable rates.
Interest on a credit card loan is generally lower than that on credit card cash withdrawals, making it a more cost-effective option for short-term borrowing needs.
Loan Against Credit Card vs Personal Loan
Both options serve different financial needs. Here is a comparison to help you decide:
Parameter
Loan Against Credit Card
Personal Loan
Processing Time
Instant to a few hours
2 to 5 business days
Documentation
Minimal (pre-approved offers)
Standard KYC and income proof
Interest Rate
12% – 24% per annum
10.5% – 24% per annum
Loan Amount
Based on the credit limit
Based on income and credit score
Collateral
Not required
Not required
Credit card loans and personal loans differ in usage and repayment structure. A credit card loan is suitable for urgent, smaller requirements, while a personal loan may be more appropriate for larger amounts over a longer repayment period.
Key Differences from Cash Advances
Parameter
Credit Card Loan
Cash Advance
Purpose
Pre-approved loan against your credit limit
Instant cash withdrawal using your credit card
Interest Rate
Generally lower
Usually much higher
Interest-Free Period
Fixed EMI-based repayment terms
Interest starts immediately with no grace period
Repayment
Paid in EMIs over a fixed tenure
Repaid with the total credit card bill
Best Used For
Planned or large expenses
Emergency cash requirement
In most cases, a credit card loan is more affordable and easier to manage than a cash advance.
Things to Consider Before Taking a Loan Against Credit Card
Before applying, keep the following factors in mind:
Impact on Credit Limit: A loan against a credit card is usually blocked against your available credit limit. This reduces the credit available for everyday transactions until the loan is repaid.
Repayment Commitment: EMIs are added to your monthly credit card bill. If you miss payments, it will attract penalties and affect your credit score.
Cost of Borrowing: It is typically higher than secured loans. So, look out for other options before deciding.
Loan Tenure: You should opt for a tenure that aligns with your financial situation. A shorter tenure increases EMI outgo, while a longer tenure reduces the monthly burden but increases overall cost.
Pre-closure Charges: If you plan to repay the loan early, check for prepayment or foreclosure charges applicable to your card.
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