Anyone can get a credit card that meets the eligibility criteria for the credit card. All the bank offers credit cards to facilities other customers so they can buy things and services without cash or debit. Credit cards offer the convenience of buying now and paying later, as well as the opportunity to build your credit history and earn rewards.
However, a bank issues a credit card with a maximum amount limit that you can use at any given time. But still, the bank also offers loans on credit cards. If you are a credit card user, you may also get pre-approved loan SMS, emails, and WhatsApp messages. But to whom does the bank send the loan offers?
The Factors Banks Consider When Offering Loans Against Credit Cards
Here are some of the factors that banks consider when offering loans against credit cards.
A bank may offer you a loan on your credit card if you meet certain eligibility criteria, such as:
- You have a valid and active credit card with the bank.
- You have a high credit score and a strong credit history.
- You have a reliable repayment history of credit card bills.
- You have a stable and high source of income.
- You are an existing customer of the bank.
- Banks typically require a good credit score to qualify for a loan against your credit card.
- Banks want to make sure that you have a good debt history. They will look at your payment history on other loans and credit cards.
Different banks may have different terms and conditions for offering loans on credit cards. You can check the interest rates and eligibility by signing into your online banking account or talking to your bank’s customer care. Some banks may also offer pre-approved loans on credit cards based on your usage and relationship with them.
There are many facilities that you can get on a credit card:
- Purchase protection: This is a type of insurance that covers you in case of damage or theft of goods purchased with your credit card.
- Travel insurance: This can cover you for things like lost luggage, medical expenses, and trip cancellations.
- Cash advances: This allows you to withdraw cash from your credit card account. However, cash advances typically have higher interest rates than regular purchases.
- Rewards: These rewards can then be redeemed for things like travel, merchandise, or cash back.
- Extended warranty: This is a type of insurance that extends the manufacturer’s warranty on products purchased with your credit card.
- Zero-interest financing: This allows you to make purchases and pay them off over time without interest. However, you will typically need to have good credit to qualify for zero-interest financing.
- Credit building: Using a credit card responsibly can help you build your credit history, which can make it easier to get approved for loans and other forms of credit in the future.
Reasons for Bank Denial of Loan on Credit Card
Banks may not give loans on credit cards if the applicant has a low credit score if their income is not high enough, if they are carrying too much debt, or if they fail to meet any of the lender’s other conditions. A bad credit loan can be a good option for borrowers who need money but have difficulty getting approved for a loan from a traditional lender. However, borrowers should know clearly that bad credit loans often have high-interest rates and fees, which can make them expensive to repay.
