What are Credit Card Loans and How Do They Work?

Credit Card Loans - The quickest loanDo you know that credit card loans and other institutionalized types of loans are more predominant in high-income economies than the developing countries? Informal loans such as borrowing from friends or family, account for about forty percent in the developing world.

Consumers in high-income countries have widespread credit card ownership because they see credit cards as an interim to formal loans. As of 2011, about sixty two percent of adults in the U.S. own a credit card.

On the other hand, the most usual reasons for borrowing money in developing countries are for health purposes and emergency.

Consequently, how should credit card loans is considered by consumers? In general, it should be a tool to overcome poverty, increase economic growth, and reduce differences in income.

People can use their savings to build their credit in order for them to afford to buy a home, car, and even start or grow businesses during good times. Credit cards can also help consumers to prepare for the difficult times such as economic instability, natural disaster, or sickness.

Without credit cards and other financial tools, it would be difficult for families to have the means to overcome poverty.

What are Credit Card Loans?

Credit card loans or loans on a credit card are like personal loans, but are pre-approved and done without any documentation. Personal loan is one of the quickest options for you to get a loan. However some paper works are still needed that will take a couple of days before the loan is released.

In the case of loans on credit cards, there are no documentations needed that make this type of loan the quickest in obtaining unsecured finance.

Often, loans on credit cards are mistaken as cash withdrawal on a credit card. The main difference between the two is the interest rate charged. Interest on loans on credit cards could be similar of a bit higher than personal loans, while interest rate on a cash withdrawal is much higher and the amount is limited compared with the eligible amount of loan on a credit card.

This type of loan facility is most appropriate when you need immediate cash and your cash withdrawal limit is not sufficient to your needs. Also, a cash withdrawal will entail high interest rate.

Special Features of Credit Card Loans

Credit Card Loans - How to ApplyCredit card loans can be quickly disbursed because there are no documentations involved. Other special features of this loan facility are:

  • The interest rate for this loan is based on the type of credit card you have (i.e. platinum, silver, or gold) and your credit profile. Therefore, if you have a good credit score and credit history, your interest rate could be lower.
  • The processing fee is could be a specific minimum amount or a percentage on the amount of loan.
  • The loan could have a term of 6, 12, 18, or 24 months.
  • The payment for the loan will be a monthly installment billed to your credit card each month until fully paid.

Eligibility and Allowable Amount for Credit Card Loans

Credit card loans are provided by credit card issuers to consumers with good repayment history and high credit score. Therefore, if your track record over the lifespan of your credit card is good; your credit card issuer will provide you this facility.

To find out if you qualify for this type of loan facility, you may call the customer care of your bank and inquire about the facility and get the needed details.

The amount of allowable loan is dependent on the credit limit of your credit card, which is dependent on your credit score, income, and payment history.

Before you decide on availing credit card loans, bear in mind that since this loan is unsecured, the interest rate will be higher than secured loans.

Also, the use of your credit card will be constrained and the cash withdrawal facility will be restricted if you avail of a loan on your credit card.