Personal loan, gold loan, loan against insurance and home loans are some of the common types of credit options we know about, right? But seldom do people know about an additional loan option that only credit card users have. It is a loan against a credit card. If you own a credit card and want some urgent funds, weigh the following benefits and drawbacks before seeking a loan against HSBC Visa platinum Credit card:
Super Quick Disbursement
Among the credit facilities with shortest processing and disbursement times among all others are credit card loans. Since this loan is pre-approved, there is no paperwork required to qualify current credit cards, hence money is transferred quickly—a few hours after going for HSBC Credit card apply. Moreover, some credit card issuers assert that, if not less, they could release money in a few minutes. For those who qualify for the loan, the only requirements are to apply online using internet banking or get help from customer support agents of the credit card issuer. You could choose demand draft or have the loan amount straight credited to your account.
Serves as an alternative to other loan options
Loan against credit card serves well as a substitute for other financial sources. In any case, credit cards are a good source of money; but, in times like the current epidemic-driven lockdown, restrictions, less working hours and staff for lenders, and unstable economic conditions, they are especially helpful. One of the fastest payout times, pre-approval status, and simplicity of online or over-phone loan application submission with banks define among the benefits of credit card loans. Should a financial crisis develop, liquidity mismatch, or debt consolidation, qualified current credit card holders who are ineligible or who have not been successful in qualifying for other loan options could apply for a credit card loan using theirs. Though you should review lenders and loan options depending on several criteria, including interest rate, loan term, processing fee, and overall loan amount you are looking at, before choosing one.
Repayment tenure of up to 5 years
Loan terms run six months to five years, thus the borrower can choose a term whose accompanying interest payments make sense for her to pay back over time. Remember that choosing a longer loan term will increase the total interest cost even if it will produce smaller monthly payments. As such, it is advisable to select a loan term that corresponds with your capacity to pay back the debt. Your loan EMI will be linked with your credit card account thus, if you do not pay your credit card bill in whole and on time, you will pay significant financial expenses in the form of heavy credit card debt charges and a late payment fee.
Cons of loan against credit card
Higher interest rates than personal loan
Among other factors, your HSBC Visa platinum Credit card interest rates on loans depend on your credit score, type of credit card, repayment history, employer, and job profile. Under unclear economic times like the current one, credit card issuers could, however, charge even higher credit card rates. Generally speaking, the interest rates on your credit card loan are at least one percent higher than those of personal loans open to those with your credit profile. Those who currently have credit cards and several of them should thus make sure to compare the interest rates of the credit cards they now have with any other loan possibilities they could be qualified for, such as instant personal loans or digital top-up home loans from different lenders.
Getting a loan against a credit card temporarily reduces the cardholder’s credit limit, so discouraging next credit card purchases by the cardholder. This is so since loans taken out against credit cards only cover a set limit approved by the credit card issuer.
Still, the loan limit will be released gradually as long as you keep sending loan E-mails. Moreover, some credit card issuers could grant this loan above the credit limit the card offers. This helps you to keep your credit limit intact and lets you keep using your credit card for regular purchases. Remember, though, that a credit card issuer would only show this option following several criteria, including past performance and capacity to repay the bills and EMIs back. So before you go for the next decision or recommend someone to go for HSBC Credit card apply, ensure to be aware about the loan against credit card facility, and its pros and cons.
Restricts your cash withdrawal limit
Usually a percentage of your credit limit, credit card cash withdrawals are allowed up to a set limit, same as credit limits. While some credit card issuers completely forbid the cash withdrawal limit, others let loan obtained with a credit card to be taken. Even if having a credit card will help with financial difficulties, using it to make ATM withdrawals should be avoided as much as possible since it results in major finance costs in the form of high credit card interest rates and cash withdrawal fees.
Conclusion
Credit cards are most definitely one of the most useful sources of credit given their many benefits and features—especially in hard times like the covid pandemic that shook the entire world in 2019-20 and beyond. But besides credit cards, their not so known feature of loan against HSBC Visa platinum Credit card can turn out to be really helpful. After carefully analysing its pros and cons, finalize the decision to take the loan or not, as per your financial needs and offered loan amount, rates, tenure, etc.
Last but not the least, keep in mind that this facility of loan against credit cards is mostly a pre-approved loan which your credit card issuer will likely come forward and offer you if you seem eligible. If you decide to take the loan, make sure to opt for a comfortable tenure and EMIs, and pay the bills and EMIs timely every month.