Credit cards in your wallets are always at your service during the times of financial emergency. People tend to go for credit card loans taking them granted like credit card usage. In fact, there is much difference between credit card usage and credit card loan. There benefit of the credit card loans over other types of loans like a personal loan is you can use them instantly without disturbing available credit limit. One should know some important facts about credit card loans before you avail them over any other type of emergency loans like credit card loans.
Key Points about Credit Card Loans
Irrespective of the type of credit card use, you will be able to use the free credit for your digital transactions up to specified limit within the billing cycle. There is no need for you to pay the interest for the credit taken through this period if you can repay them within the billing cycle. During the times of emergency, people tend to go cash withdrawals from the credit card which are presumed to be credit card loans. There is a key difference between two. The interest rate cash withdrawals of credit card are higher than loans. The user is liable to pay interest on the immediately from the day of withdrawal and it is calculated on daily basis.
Be prompt in your payments
Credit card loans should be your last resort to address your expenses as they carry a high rate of interest. When you have credit card loan in your portfolio, you should make it a priority in your budget and repay it promptly. Any delay in the payment of EMI will attract late payment fee along with the high rate of interest.
Available at flat interest rates
Credit card loans are available at flat interest rates. The rate of interest on the loan remains fixed during the tenure of the loan. Unlike personal loans, these credit card loans are not calculated at reducing the balance. The interest you pay for the EMI here are not considered towards the principal amount of the loan so, the in the interest rate is calculated for the total loan amount throughout the tenure.
Balance transfer is option to lower interest on credit card loan
When you choose to go for balance transfer on the credit card loan, the new lender will pay off the outstanding balance on the credit card with the help of demand draft or loan account number of the old bank. You will remain as the value added customer for the new bank with a new rate of interest and you have to maintain good credit score to fetch the best rate of interest on your fresh loan.
Credit score is important
Unlike any other loan, credit score is important to get a credit card loan. No lender will approve the loan if you have subprime credit. Defaulting the loan will impact your credit score for sure.