Last Updated on February 20, 2023 by admin
It’s a no brainer that most of us are aware of personal loans’ prevalence, right? But what about loan against credit card, which have recently emerged as a personal loan substitute? Users of credit cards who are qualified for both credit card loans and personal loans frequently struggle to decide which course to take.
So, in order to assist you in making your decision and determine which loan choice is better for you, below is a comparison of the two:
Criterion for Loan qualification
Lenders evaluate a borrower’s credit history, monthly income, employment history, and other variables before choosing whether or not to offer a personal loan. On the website or app after applying, you may also check the icici personal loan status.
However, the credit card issuer chooses which cardholders are qualified for a pre-approved loan when a loan is secured by a credit card. This choice is primarily based on the card type, spending habits, and history of bill repayment of the cardholder. Borrowers must already be credit card users in order to borrow money against a credit card from the card issuer; however, there is no necessity for borrowers to already be in a relationship with the lender in order to qualify for a personal loan.
The effective interest rate
Depending on the lender and the borrower’s icici personal loan payment history and score, personal loan interest rates might range from 10 percent to 24 percent. The interest rates offered for loans secured by credit cards are normally about 1% higher than those charged for personal loans. Therefore, if you can wait for the disbursal for no more than a week, it would be prudent to choose the personal loan path.
The processing time and other associated costs
A loan that is secured by a credit card frequently has one of the quickest processing times when compared to other types of credit facilities. After applying for the loan, the money can be taken out of the account within a few hours. Existing users who meet the eligibility standards may bypass the necessity that they provide physical documentation since loans against credit cards are pre-approved. Additionally, certain card issuers guarantee that the money for these loans would be disbursed immediately. To apply for the loan, a credit card holder only needs to submit an online application using internet banking or by calling customer service, assuming they are qualified. Processing charges for credit card loans could be as high as 2.5 percent of the total loan amount.
In the case of personal loans, the applicant must present pay slips, Tax Return forms, and other evidence relevant to the borrower’s identification and eligibility before the loan can be disbursed. Personal loans are normally disbursed between two and seven days after the loan application has been submitted, however this depends on how long the document verification process takes. Checking the icici personal loan status of application online will keep you informed of its progress. Although the processing costs involved can reach up to 3% of the loan amount, many lenders waive these costs around the holidays or as part of special promotions.
The loan’s amount
The loan limit, set by the card issuer, is the maximum sum that may be borrowed using a credit card as security. The cardholder’s credit limit is temporarily restricted to the amount of the approved loan, which may limit the cardholder’s capacity to make purchases. However, as long as the borrower continues to make the appropriate monthly icici personal loan payment on the loan’s EMIs, the credit limit will eventually be restored. Some credit card issuers have begun giving users loans in the form of credit cards, even when the available credit limit on the card has been reached.
Contrarily, the amount of a personal loan normally ranges between 50,000 and 20 lakh, however some lenders claim they may approve loans up to a maximum of 40,000 lakh rupees. Keep in mind that the factors such as the borrower’s ability to make icici personal loan payment and the chosen loan period will largely determine the approved amount of a personal loan. Also keep in mind that personal loan interest rates frequently change depending on the loan size.
Duration of loan tenure
Most creditors would extend the maximum tenure duration for a personal loan up to seven years, but the normal icici personal loan payment tenure from one to five years. Also keep in mind that you can use icici personal loan status tool for your application, just like you can use an online emi calculator to determine the correct emi by selecting the appropriate duration.
The repayment period for a loan secured by a credit card, however, might be anywhere between six months and five years.
Prepayment conditions and fees
Prepayment penalties for personal loans might be as much as 5% of the total amount borrowed, depending on the lender. Banks, particularly those in the public sector, do not, however, apply prepayment penalties since personal loans from banks are frequently offered at variable interest rates. Keep in mind that, in compliance with the RBI’s recommendations, banks cannot apply prepayment costs on loans with variable interest rates. Don’t forget to check the icici personal loan status after applying for one so that you won’t have to worry about whether your application was accepted or denied.
Credit card issuers frequently charge prepayment fees of up to three percent of the total amount of the loan that is still unpaid when credit cards are used as collateral for loans. Before choosing the type of loan and the lender, it is crucial to evaluate prepayment fees in addition to other crucial factors like interest rates, repayment tenure, amount of loan, processing charges, and so on. This is because prepayment fees can eat up a sizable portion of the overall interest savings earned upon making the prepayment. This is because prepayment penalties may be irrevocable.