Loan Singh Explains – What Is A Credit Card Loan?

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Introduction

At time of financial needs, Loan Singh’s digital lending platform provides personal loan to credit worthy, and under-served, but salaried individuals. At Loan Singh, the application process is quick & easy, approval is given instantly, and funds are disbursed in 2 days. Many people own credit cards, and wonder why to apply for a personal loan, when you can pay for expenses with your credit card. The problem with this is that credit cards come with a credit limit, and over-shooting the limit can lead to penalty – which will affect your credit bureau score. Although availing a personal loan from a digital lending platform like Loan Singh is the best alternative for quick and seamless funds, did you know that you can also apply for a loan via your credit card?  Let’s look at personal loan first, and then learn more about credit card loan.

 

Personal Loan

A type of unsecured loan which can be availed for just about any personal finance need. The needs can include home improvement or repairs, medical emergencies, wedding, travel, purchasing high-end gadgets, debt consolidation, etc. A personal loan is provided by Loan Singh or a bank based on eligibility criteria, such as current income, repayment history and credit bureau score. A personal loan is not secured against any assets or collaterals, such as vehicle or home loans.

Since no collateral is required, your credit worthiness is the only requirement that can mitigate the risk of defaults. A personal loan is a fixed debt which you pay off in equal monthly installments (called EMIs), over a fixed tenure. The main reason why Loan Singh is the best option for personal loan is because

Easy and swift – At Loan Singh, everything from application to disbursement happens online. With only PAN and bank statement/net-banking credentials, you can apply for a personal and pay for your emergency requirements.

No collateral – As mentioned earlier, personal loan is an unsecured loan. All you need for a personal loan is a clean credit repaying capability.

Loan amount and tenure – The loan amount for a personal loan at Loan Singh can range from Rs.50,000- Rs.5,00,000. The repayment is done via EMIs, with interest rates on reducing balance method. The personal loan tenure can be of 3 to 36 months.

 

Credit Card

A type of unsecured credit, a credit card is a rectangular piece of plastic or metallic alloy that identifies your financial credit account. It is a card issued by banks or credit card companies to cardholders, for payments to merchants. The card issuer creates a revolving account, and grants a line of credit to the cardholder. The cardholder makes payments via his/her card based on a credit limit assigned by the card company. The cardholder is then required to pay-back the amount spent along with the agreed interest and charges.

All credit cards contain a magnetic strip on the back which identifies your financial credit account. Also present on the card is an RFID chip (protection against fraud) along with your name, credit card number and card validity.

Billing cycle – It is a period within which all purchases and payments are accounted for and billed. It usually consists of 30 days. A grace period of 15-25 days is added to the total number of days of the billing cycle. No charges are incurred by the cardholder if the payment of previous month balance is done before the end of the grace period.

Minimum balance – It is the minimum amount to be paid to the credit card company, in case the card holder cannot pay the total outstanding amount by the due-date. It usually is 5% of the total balance.

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Credit Card Loan

Credit cards also provide you with an option for a pre-approved credit card loan either within or over their credit limit. You have to repay the loan at the pre- approved date while being charged an interest fee. Every card issuing company has their own eligibility criteria for a loan on credit card. The interest rates are generally high for credit card loan and if not paid on time, is levied with a penalty. A processing fee is charged for application of a credit card loan. At most times a prepayment penalty is charged towards the foreclosure of credit card loan. No documentation or collateral is required for credit card loan.

The benefits of credit card loan are that you can break your expensive purchases into affordable installments. Some card companies offer a balance transfer feature on the credit card loan EMI wherein you can transfer the outstanding balance on multiple credit cards to a single credit card and pay the EMI. The amount of loan depends upon the credit limit. Credit card loan do not require a loan guarantor or any post-dated cheques.

Credit card loans are different compared to cash withdrawal from a credit card. The credit limit on cash withdrawals is lower than that provided as a loan.

The interest rate charged for cash withdrawals using credit card is higher than that for credit card loans.

 

Difference between Personal & Credit Card Loan

Both loans are provided after assessing your credit worthiness. Credit card loans are available easily because the credit card company already knows your income and your monthly bill payment behavior. To avail a credit card loan all you need to do is contact the customer care of the card company and request a loan. If eligible, the amount is credited to your account within 2-3 days.

You can avail a personal loan from Loan Singh and get the amount in your bank account within 2 working days. Credit card loan comes with 0.5 – 1% processing fee. They have pre-closure charges between 2-5% of the principal outstanding amount. Credit card loans come with an option for lower tenure – as low as 6 months. At Loan Singh you don’t have to pay any prepayment penalty in case you want to close the loan before the end of tenure.

So what are your thoughts on credit card loans? If you have any views or pointers of your own do comment below.

 

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