Loan Against Credit Card – A Complete Guide

Ever been hit with an emergency expense right when your wallet’s on empty? Your phone dies, rent's due, and payday's a week away. In today's fast-paced world, waiting for a traditional loan feels like trying to stream Netflix on 2G. That's where a loan on your credit card comes in, quick, hassle-free, and often a real lifesaver.

Instead of just swiping at checkout, this feature lets you convert your credit limit into instant funds, with no extra paperwork or awkward bank calls. It's like your credit card saying, "Don't worry, I've got you," and the money lands in your account.

Banks get it, we want speed and convenience. That's why credit card loans are just a few taps away. But while they're great for emergencies or one-time needs, it's easy to slip into a "tap now, think later" habit. Use it wisely, it's a fast fix, not a financial plan.

Here's everything you need to know about how it works and whether it’s the right move for you.

Coverings

• What is a loan on a credit card, and how does it work?
• Types of Credit Card Loans and Offers
• What are the benefits of taking a loan against a credit card?
• Factors to consider before taking a loan against a credit card
• How to Take a Loan Against a Credit Card?

What is a Loan on a Credit Card, and How Does it Work?

A loan on a credit card, also sometimes called a credit card advance, is basically a short-term loan you can take out using your available credit limit on the card. It's different from using your credit card for regular purchases in a few ways:

1. Pre-approval: Many banks offer these loans as pre-approved options for existing cardholders with a good credit history. This means you might not need to fill out a lengthy application and wait for approval. Instead, you may be able to apply for the loan online or through your bank's mobile app and receive the funds quickly.
2. Disbursement: The loan amount is typically deposited into your bank account, not credited to your credit card itself. This gives you more flexibility in how you use the funds, as you're not limited to making purchases with the credit card itself.
3. Repayment: You repay the loan in instalments, usually over a fixed term, just like a regular loan. An interest rate will be charged on the loan amount, which can be quite high compared to other loan options. Be sure to factor in the interest rate when considering whether a credit card loan is the right option for you.

Types of Credit Card Loans and Offers

The world of credit card loan offers is surprisingly diverse. Banks tailor products to suit different needs and life situations, using the flexibility of loans and credit cards to give users more financial breathing room. Whether you're looking for a loan to pay credit cards or wondering how to pay the loan with a credit card, there's likely a solution that fits your need. Let's unpack the popular types:

1. Pre-approved loan on a credit card

If you're still wondering, can we take a loan from a credit card? The answer is yes, and this is the smoothest way. Banks offer pre-approved loans to customers with excellent credit behaviour. Since your data is already with the bank, the process is quick, often with zero paperwork. These are typically sanctioned against your credit limit, and a portion of it is blocked until repayment.

2. Loan Within Credit Limit (WTL) vs Loan Over The Limit (OTL)

Understanding how a credit card loan works starts with this distinction:

• Loan Within Limit (WTL): The loan is drawn from your available credit. For example, ICICI Bank's Personal Loan on Credit Card (PLCC-WTL) allows eligible customers to request a loan amount up to the available credit and/or cash limit on their card. The sanctioned amount is blocked from the credit limit until it is repaid through EMIs.
• Loan Over Limit (OTL): These can be offered over and above your credit limit, as seen in products like ICICI's PLCC-OTL. While the core credit limit isn't reduced, a portion may still be blocked for EMI repayment. These offers are typically extended to users with strong credit profiles.

3. Converting purchases to EMIs

Worried about a high-value transaction? You can convert it into EMIs, an increasingly popular form of loan on a credit card. Most banks let you do this via their app or portal. SBI's FlexiPay allows this for purchases above ₹500 within 30 days (as long as it meets the minimum booking amount of ₹2,500). Note that fees and interest may apply.

4. Balance transfer to EMI

If you're managing several cards, this option gives you a loan to pay credit cards by transferring all balances into one card, often with a lower interest rate. It helps simplify payments and is a smart way to manage debt, just make sure you review post-promo rates. This form of loan for credit cards is often used for consolidation.

5. No-Cost EMI

No-cost EMI schemes sound appealing, but make sure to compare final costs. These offers often hide the "cost" in the product price or remove other discounts. Here's a quick summary table of types of credit card loans and offers: 

Type	Description
Pre-approved Loan	Quick loan for customers with good credit
Loan Within Credit Limit (WTL)	Loan from the available credit limit
Loan Over The Limit (OTL)	Loan beyond the credit limit, without reducing it
Conversion to EMI	Convert purchases into monthly EMIs
Balance Transfer to EMI	Transfer multiple card balances into one EMI loan
No-Cost EMI	EMI with no visible interest may hide costs

What are the Benefits of Taking a Loan Against a Credit Card?

Taking a loan against a credit card has several benefits, especially when you're in urgent need of funds. Here are the key advantages:

1. Quick Access to Funds: One of the most significant benefits is the speed of access to funds. Many credit card issuers offer pre-approved loans to their customers, which means you can get the loan amount disbursed to your bank account swiftly, often within a few hours or days. This is particularly useful in emergencies or when you need immediate financial assistance.

2. No Need for Collateral: Unlike secured loans, such as home loans or car loans, you don't need to provide any collateral to avail of a loan against your credit card. Your credit limit on the card acts as a basis for the loan amount you can apply for, making the process much simpler and faster.

3. Minimal Documentation: Since you're already a customer of the credit card company, the lender already has most of your financial details. This drastically reduces the need for additional documentation, streamlining the application process.

4. Flexible Repayment Terms: Credit card loans often come with flexible repayment options. Borrowers can choose a repayment term that suits their financial situation, helping them manage cash flow better. Additionally, some issuers may offer the option to convert large purchases into EMIs (Equated Monthly Instalments), which can also ease the repayment process.

5. Pre-Approved Offers: Banks often provide pre-approved loan offers to customers with good repayment histories and credit scores. These offers can come with competitive interest rates and terms, making them an attractive funding option.

6. No Restriction on Usage: The loan amount disbursed can be used for any personal purpose without any restriction from the lender. Whether it's for medical emergencies, home renovation, or funding a vacation, you have complete freedom in how you wish to spend the money.

However, it's crucial to consider the interest rates and terms associated with such loans, as they can be higher compared to other financing options. Always ensure you read the fine print and understand the repayment structure before proceeding. To compare current interest rates across various credit cards, visit our in-depth Credit Card Interest Rates guide.

Factors to Consider Before Taking a Loan Against a Credit Card

Here are some important factors to consider before taking a loan against your credit card in India:

1. Interest Rates:  Interest on loans against credit cards is typically high, often exceeding 20% per annum. This can be significantly higher than interest rates on personal loans or other borrowing options, especially for borrowers with a good credit score. Carefully compare the interest rate offered by your credit card issuer with other loan options available to you.

2. Repayment Tenure and Impact on Credit Utilisation: Loan tenures for credit card loans are generally shorter than personal loans, ranging from 3 months to 5 years. However, remember that a longer tenure translates to a higher overall interest cost. Additionally, since your credit card limit gets reduced by the loan amount, your credit utilisation ratio (outstanding credit divided by credit limit) increases. A high credit utilisation ratio can negatively impact your credit score.

3. Eligibility and Processing Fees:  Not all credit card holders are automatically eligible for a loan against their credit card. Issuers typically consider factors like your creditworthiness, income stability, and credit card usage history before offering a loan. Additionally, there might be processing fees associated with obtaining the loan.

4. Alternatives: Before taking out a credit card loan, explore other borrowing options, such as personal loans, lines of credit, or even overdraft protection on your checking account. These options might offer lower interest rates or longer repayment terms.

5. Urgent Need vs Planned Expense: Loans against credit cards are a good option for immediate and unforeseen needs. However, for planned expenses, consider saving up or exploring other financing options with lower interest rates.

6. Financial Discipline: The biggest risk associated with credit card loans is falling behind on repayments. Since the loan is linked to your credit card, late payments can attract high penalty charges and severely damage your credit score. Make sure you have a solid repayment plan in place before taking out the loan.

Before opting for a loan on a credit card, consider credit card comparison, interest rates, fees, and tenure options to make the smartest financial choice.

How to Take a Loan on Credit Card?

So, you've weighed the pros and cons and decided a loan on a credit card is your financial move. Good news: it's usually a lot simpler than applying for a traditional personal loan. 

Here's a table that shows just how different personal and credit card loans are:

Feature	Personal Loan	Credit Card Loan
Approval Time	1–7 days (depends on documentation & profile)	Instant or within minutes (for pre-approved)
Documentation	KYC and income proof are often required	Minimal or none (bank already has details)
Loan Amount	Based on income and credit profile	Based on credit limit or pre-set eligibility
Disbursal Speed	Slower compared to credit card loans	Very fast (instant in many cases)
Interest Rate	Up to 24% p.a.	Up to 45% p.a. (can be higher than a personal loan)
Impact on Credit Limit	No impact on card usage	May block your credit limit (if within limit)
Best For	Large planned expenses	Quick, short-term liquidity or purchase conversion

If you're wondering exactly how to take a loan on a credit card, here's how the process unfolds:

1. Check your eligibility: Before diving in, banks assess a few key factors:

• Credit score (CIBIL): A strong score makes you more likely to qualify.
• Credit Utilisation Ratio (CUR): Lower usage shows responsible credit behaviour.
• Repayment history: Clean records on existing loans and credit cards boost your credibility.
• Bank criteria: Income level, age, and even your spending habits may influence eligibility.

Many banks now use analytics to pre-approve offers, often pushing them via SMS, email, or directly on apps, making credit card loans online more accessible than ever.

2. Apply easily through multiple channels: You don't need to jump through hoops. Here are your options:

• Mobile app or internet banking: The quickest way is to just log in, head to your credit card section, and look for loan or EMI conversion options.
• Phone banking: Call customer service and apply over the phone.
• Pre-approved offers: Simply click an in-app prompt, SMS, or email link to accept.
• ATM: Less common and mostly for cash advances, these come with higher fees, so clarify if it's a structured loan on the credit card or not.

Whether you're exploring a loan to pay credit cards or simply need quick liquidity, knowing how to take a loan on a credit card puts power in your pocket, with speed, flexibility, and minimal hassle. Before checking your credit score, understand the credit scores, their definition, types, and how they work.

Conclusion

A loan on your credit card offers quick and easy access to funds, making it a useful option for emergencies, short-term cash flow needs, or consolidating high-interest debt. With minimal documentation and flexible repayment through EMIs, it's often faster than traditional personal loans. However, the convenience comes with drawbacks—higher interest rates than personal loans, impact on your credit utilisation and score, processing fees, and the risk of falling into a debt trap if not managed carefully.

Using a credit card loan wisely means borrowing only when necessary and having a clear repayment plan. Avoid using it for lifestyle expenses or speculative investments, as this can lead to financial stress.

If you want to explore credit cards and find the best one for your needs, try Finology Select. It lets you compare over 90 top Credit Cards in India and provides tools to help you pick the right card tailored to your financial goals.

FAQs

1. Can we take a loan from a credit card?

Yes! Most Indian banks offer credit card loans if you meet their eligibility criteria. It's a common feature for cardholders.

2. How much loan can I get?

It depends on your card's limit, your credit score, income, and past payment behaviour. You may get up to 90% of your unused credit limit, or sometimes even more, depending on the bank.

3. What are the usual interest rates?

Interest rates typically range from 10.8% to 25% per year. Your rate depends on your credit profile, the bank, and the loan offer. Always confirm before applying.

4. Will it affect my credit limit?

Yes, if the loan is within your card limit (WTL), that amount is blocked from your available credit. If it's over the limit (OTL), your spending limit stays unaffected.

5. What if I miss an EMI?

Missing payments leads to late fees and may hurt your credit score. It's reported to credit bureaus like CIBIL, which can affect future loans. Banks must notify you of overdue payments as per RBI rules.

6. Can I repay early?

Yes, but banks may charge a prepayment or foreclosure fee, usually a small percentage of the remaining loan.

7. Are there any RBI rules?

Yes. RBI requires banks to follow fair lending practices, explain all terms clearly, and avoid aggressive recovery methods. These rules protect borrowers and ensure transparency.