Banks grant a loan with a specified EMI schedule to the borrowers. You can use a credit card to pay the EMI amount monthly based on the credit card limit. The main challenge in this area is that you will need to keep your card limit in mind. If your transaction exceeds the fixed limit, you could be charged a penalty.
But using a credit card to issue a loan and pay the EMIs would also result in a higher overall rate of interest. As a result, you will be liable for paying interest on the credit balance you used and the loan you obtained from a financial institution. When your EMI scheme is in place, the bank will temporarily block an agreed sum to the price of the transaction you make using the EMI plan. The bank will start increasing the credit limit as soon as you begin paying off your debt, which will align with your monthly EMI.
Should You Consider Paying Loan EMIs through a Credit Card?
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Your affordability is increased if you choose to pay EMI using a credit card. Additional promotions like cash backs, quick discounts, and other incentives might be available. Depending on the store and product type, you may qualify for various offers from manufacturers, merchants, and other reductions. Borrowers can steadily improve their overall credit record by consistently paying all of their EMIs on time in the long term.
Is Using a Credit Card to Pay EMI Advantageous?
Using a credit card when you lack the resources or liquidity to make the loan EMI payments is ideal. Because it allows you to make purchases up until the due date, a credit card is excellent. If you pay this back before the deadline, you get those extra days for free. Since a credit card allows you to opt for a quick repayment process, it is a convenient method in the long run. You do not even require additional documents for the procedure.
However, when you miss the EMI payment, the cost is added to the bill for the following month. In addition to the actual interest rate on the loan, an even higher interest rate may apply to this amount.
Apart from that, having a basic understanding of the credit limit is necessary. If you exceed the limit, it will not be a feasible situation in the long run. Essentially, you are withdrawing funds from the bank and returning them. This is true since a credit card is a type of immediate loan. If you appropriately use credit cards in India and pay them off before the due date, there won’t be a problem. In the event of a credit card default, interest rates, finance charges, and late payment fees will increase. It will increase your payments and harm your ability to obtain credit.
Credit Card Loan Interest Rate
|Credit Card Loan||Personal Loan|
|Credit card loan interest rate||Depending upon the person’s profile, it is 12% annually to 29% annually||Based on borrower profile, it is 10.50% per annum and more|
|Processing Charge/Once-Off Usage Fee||1.5% to 3% of the loan’s amount||5% maximum of the loan amount|
|Process Duration||For identical bank transactions, a few hours; for NEFT/DD, 5-7 working days||5-7 working days|
Using a credit card to make loan EMI payments seems feasible. However, understanding how to use it strategically can be tricky. Make sure you are aware of the card’s limit. Be aware that making a loan and paying the payments using a credit card may exceed the authorized cash limit. The main advantages of using credit card loans include their speedy disbursement and minimal paperwork requirements. To make the necessary preparations, use an online EMI calculator for credit card loans.