Here are 5 things to keep in mind before taking out a credit card loan, otherwise you may end up losing money.
Credit card use is on the rise. If you need money, you can use a credit card to meet your needs. The bank also offers credit card loans. That loan is similar to a personal loan. If you are also thinking of taking a loan on a credit card, you need to pay attention to things like its interest rate and late fees.
The loan amount is determined according to the card limit
The bank offers you pre-approved loan depending on the limit of your card. Loans are not offered to you beyond the credit card limit. Loan interest rates are lower than interest rates on credit cards. It has a fixed rate of interest. The annual interest rate for a credit card is usually 35-40%.
Repay the loan on time
If you do not repay the loan on time, you are less likely to get a top-up loan. In addition, if you do not pay on time, it will worsen your credit score and make it difficult for you to get a loan in the future.
Default will cause more difficulties
If you do not pay the loan installment on time, it will be considered as default. Defaulting on credit card payments and defaulting on loan payments are two different things. Failure to pay the loan installment on time (default) has a worse effect on the credit score of the cardholder. Therefore, pay the loan installments on time.
Be aware of loan term and processing fees
The processing fee for a credit card loan is 1-5%. The term of the loan will be determined by the cardholder. Usually it is a maximum of 24 months. It also has a pre-closure feature. There is no loss in this, however you will have to pay a pre-closure charge. Therefore, one should think carefully before choosing a loan term.
Loans need to have a good record Credit cardholders can easily get a pre-approved loan even in an emergency. However, for that you should have a good record that you have been paying old bills on time. Pre-approved loan has no documentation. Which makes it process faster. Sometimes you can get a loan in just a few hours.
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