Loan On Credit Card: Beware Of The Charges & Problems: Finance Trading Times

Loan On Credit Card: Beware Of The Charges & Problems

In this article, we will discuss the Loan on Credit Card, benefits, problems and charges to look for. Now a days, everyone carries a credit card. It was in 2008 when due to the financial market problems across the globe, the credit card companies all of a sudden stripped out the cash withdrawal limits as well as the spending limits on credit cards. However, now in 2010, things are looking much better and the so called "Hot Offers" on Credit Cards are back. The telemarketers are back in job calling people from all walks of life, asking them to take the Free for Life Credit Card . Not only that, exisiting credit card holders are being flooded with extra offers which include big discounts, freebies on spending , bonus reward points with every swipe of credit card, lucky draw and so on. One of these offers is also Loan on Credit Card, which the credit card companies are heavily marketing, both through online media, print media as well as telemarketing calls. But what actually is this Loan on Credit Card, how does Loan on Credit Card works, what are the charges and problems with Loan on Credit Card. Loan On Credit Card
What is Loan on Credit Card?
Loan on Credit Card is a loan offered to exisiting credit card holders by the credit card company. One benefit of Loan on Credit Card is that it is pre-approved i.e. if you get a call from your credit card company offering your Loan on Credit Card, then you dont need any approval for that. Even you can call your credit card company and ask whether they can offer Loan on Credit Card.
Usually, it does not require any documentation, and it is a pure personal loan.

What are the limitations for Loan on Credit Card?
The limitations are in terms of amount of money you can take on loan. Say your credit card has a spending limit of 10,000 and cash withdrawal limit of 3000. Then your loan amount might be limited due to these factors.
Second limitation is that although it seems all paper-less and document free process, some signing of documents or email confirmation or recording of your acceptance of loan on phone will be required. It might take few days before you actually get the loan money
Third is that you will usually always get a paper check which will be account payee. Hence, you may loose some days for the check to be encahsed and credited to your account and money to be available for use.

How is Loan on Credit Card different from Cash Withdrawal on Credit Card?
They are different and should not be mistaken for being the same.
Cash Withdrawal has a limit, say 3000 as cited in example above. You will not be able to withdraw more than that.
Once you withdraw the amount, you need to pay the interest from that day onwards. The interest rate charged is known to you in advance.
You also need to pay the amount back (atleast the minimum amount) to credit card company by your billing date.

On the other hand, the Loan on Credit Card is based on availability and offer, and the period and payment frequency is fixed. Interest rate charged on the Loan on Credit Card is usually a bit lower than that on cash withdrawal.
However, there might be a charge in the name of "Processing Fee" which can vary widely.
Even if you try to pre-pay the loan, you may have to pay pre-payment charges.

So cash withdrawal can be used when in real urgent situation, which loan on credit card should be opted for when there is some time available and there are no other sources of money. Next: Beware of Charges & Problems for Loan on Credit Card
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