Take credit card loan only in emergency

How do loans against credit cards work?     —Sunil Saxena
Loans against credit card are like personal loans but without the cumbersome documentation. Loan on credit card may not be available to everyone. Banks provide this loan to credit card customers with high credit standing. This means that if you have been using a particular bank’s credit card for some time and you have a good payment track record, you are most likely to be eligible for a loan on credit card. Some banks limit or block the cash withdrawal on your credit card to the extent of loan you have taken. For the rest, loan on credit card works like a personal loan — with a processing fee, repayment in monthly instalments and prepayment facility, but often with a hefty pre-payment charge. This is useful only when there is an urgent need for liquid funds since any other loan will take at least two weeks to process and also because of the documentation involved which is not the case in loan against credit cards. One big issue is the service tax on interest which may be payable on loan against credit card but not on a regular personal loan.

I have taken a personal loan in the past and delayed on the payments. Recently, I have cleared all the dues on the personal loan but the bank refused to give an NOC. Is it necessary? —Sidhi Tare
Since you have delayed your payments on personal loan and cleared all your dues recently, it would be advisable to get an NOC from the bank to obviate any issues in the future. In any case, the delays will be reported in your credit information report and is likely to reduce your chances of getting a loan in the future.

The writer is CEO of Apna Paisa, a price & features comparison engine for loans, insurance and investments, and can be reached at hrdna@apnapaisa.com