Credit card loans have revolutionized how banks and financial institutions offer credit to customers.
Due to the various facilities a credit card offers, there has been a compound annual growth rate of 20% in credit card issuance between the years 2017 and 2021.
A common misconception is that credit cards are for the rich.
On the contrary, credit card companies offer credit card loans to low-income group customers too.
People with a low income are often unsure if taking a credit card loan is a good idea or not.
Read on to know more about credit card loans and find out if credit card loans are good for an applicant with a low salary or not.
What is a credit card loan?
A credit card loan is an unsecured personal loan that the card-issuing company offers to the cardholder against his credit card.
A credit card loan is easier to get since it does not require any documentation like in the case of a personal loan.
If the cash withdrawal limit on an individual’s credit card is not enough for his instant cash requirement, they take an instant loan against the existing credit card from the issuer.
Benefits of a Credit Card Loan for People With a Low Salary
- The first benefit a credit card loan offers low-income individuals is instant access to cash. People with a low salary may not have a surplus cash balance for emergency use. In such a case, if an emergency arises, they can take a quick loan against their credit card without having to give income proof or other documents.
- Getting a loan against a credit card is easier for people with a low salary. To take any other loan, the borrower needs to furnish several documents as proof that he can pay back the loan. However, he does not have to give any documents or undergo any verification to get a loan against his credit card.
- Credit card loans are quick and the customer can apply for them online or even through a phone call.
- Loans against credit cards are disbursed quickly and have a short processing time.
- The processing fee for a credit card loan is low. It is another advantage for a person with a low salary.
- The loan does not put an immediate burden on the borrower and he can pay back the loan in convenient instalments. The issuer bills these instalments to the credit card bill of the cardholder.
- The cardholder can take a loan against his credit card for flexible tenures, as per his paying capacity.
Loan against Credit Card Eligibility
The credit card eligibility criteria for a loan against a credit card are as follows:
- Usually, both new and existing customers can apply for a loan against a credit card.
- The loan applicant should have a valid credit card to avail of a loan against it.
- The customer should have a good credit history to apply for a loan against a credit card. A good record of credit repayment and a high credit score increase the chances of credit card loan approval.
Before applying for a loan against a credit card, the customer can find out if he is eligible for it through net banking, phone call, or a visit to the nearest branch of the issuer.
Documents required for a Credit Card Loan
The credit card company does not require any additional documents from the customer to offer him a loan against a credit card. It is because the customer has already submitted all the required documents while applying for the credit card. It makes credit card loans fast and convenient.
How to apply for a Credit Card Loan
Customers can apply online on the credit card issuer’s website for a credit card loan. If the customer meets the eligibility criteria of the issuer, the loan amount is disbursed to the customer’s bank account.
Conclusion
Normally, the credit card loan limit against a credit card is higher than the cash withdrawal limit on it. Individuals with a low salary can use this loan amount to meet any urgent cash requirements and pay back the card issuer in convenient installments. Credit card loans thus provide the necessary backup of emergency funds for someone with a low salary who is unable to maintain a large cash balance.
