Hyderabad: Credit cards have made our life easier and simpler. They offer multifarious benefits - from making credit purchases, cash withdrawals from ATM (automated teller machine) to availing personal loans. But all this comes at a cost. You can enjoy benefits only as long as it is used properly. Any lapse on your part will cause financial loss which may extend to debt in the worst case scenario. Let's discuss some of their benefits and drawbacks.
In a cash emergency, we explore all the available ways. We use credit card more to make purchases as it doesn't require hard cash immediately. Many prefer to take personal loans. Some borrow from their credit card which disburses the loan without the need of any documents. Very few go for cash withdrawals.
Credit companies extend many benefits to good customers. Based on your credit score and the way you use the card, the companies pre-approve this loan. They intimate the customers about these loan offers. You will get loan in one click when needed. It does not require any guarantee. It can be taken for a fixed period with fixed interest. As compared to personal loans taken from banks and financial institutions, the interest on credit card loans is slightly higher.
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Some are not checking important points before using credit cards. Taking cash and availing a loan through credit cards are different. Cash withdrawals will affect your credit limit. On top of this, 36-48 percent interest is levied on credit card withdrawals. The entire balance has to be paid by the last payment day.
Credit card loans offer EMI (equated monthly installment) payments with duration up to 36 months. The interest rate is likely to be 16-18 percent. Moreover it has nothing to do with the card limit. A personal loan is given on the card based on the documents and other evidence that you have submitted while taking the credit card. Therefore, there is no need to provide additional documents. So, this can be said to be one of the ways to get loan easily.
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As mentioned earlier, the companies offer pre-approved loans. Depending on the usage of credit card and bill payment, the loan will be approved in advance. You will know this if you check the credit card account details online. They send sms and email messages too. You can get that loan in moments when you need it. They provide details of interest, term and EMI amount. These installments will also have to be paid along with your credit card bill.
The online usage makes it simpler. The duration of loan repayment can be decided by the card user. The loan tenure is from 6 months to 36 months. Some card companies allow a period of up to five years. Now the question pops up whether it is good to go for credit card loans. Use it only when absolutely needed. Credit card loans charge high interest. Total EMIs should not exceed 40 percent of our income. Debt follows if the card bills are not paid on time, credit history and credit score will also suffer.
