Is a Loan on Your Credit Card Good or Bad? Pros and Cons Explained 2024

Are you considering the option of taking a loan against your credit card? If yes, you might be wondering whether a loan on credit card is good or bad. The answer isn’t as straightforward, as it involves weighing various pros and cons. 

Advantages of taking a loan on your credit card

One of the most significant advantages of taking a loan on your credit card is the immediate access to funds. Unlike traditional loans that may require extensive documentation and a lengthy approval process, credit card loans can often be accessed quickly. This is particularly beneficial in emergencies where immediate cash is needed, such as medical expenses or urgent repairs.

Credit card loans typically offer flexible repayment options. Borrowers can choose to pay back the amount over time, often with the ability to make minimum payments. This flexibility can help individuals manage their finances better, especially if they face temporary cash flow issues. It allows for budgeting according to personal financial situations, making it easier to handle other expenses.

Furthermore, many credit cards come with rewards programmes that allow users to earn points or cashback on their spending. When taking a loan on a credit card, borrowers can still benefit from these rewards, effectively making the loan more advantageous. This can be an appealing aspect for those who regularly use their credit cards for purchases.

Disadvantages of credit card loans

One of the most significant drawbacks of credit card loans is the high-interest rates associated with them. Credit cards often have higher interest rates compared to personal loans or other financing options. If the loan is not paid off quickly, the accruing interest can lead to substantial debt, making it difficult to manage finances in the long run.

Taking a loan on your credit card can adversely affect your credit score. High utilisation of credit limits can signal to lenders that you are over-reliant on credit, which may lower your credit score. A reduced credit score can hinder future borrowing opportunities, making it essential to consider the long-term implications of using credit card loans.

Moreover, there is a risk of falling into a debt cycle when relying on credit card loans. The ease of access and flexible repayments can lead individuals to borrow more than they can afford to repay. This can result in a situation where one loan is taken to pay off another, leading to an unsustainable financial situation.

Tips for managing credit card loans responsibly

• Set a budget: Before taking a loan, establish a budget that includes your monthly income and expenses. This will help you determine how much you can afford to borrow and repay.

• Pay more than the minimum: Whenever possible, pay more than the minimum payment to reduce the principal amount faster and minimise interest charges.

• Monitor your spending: Keep track of your spending habits to avoid unnecessary purchases that could lead to higher debt.

• Consider alternatives: Explore other financing options, such as personal loans, which may offer lower interest rates and better repayment terms.

• Use alerts and reminders: Set up alerts for payment due dates to ensure you never miss a payment, which can lead to late fees and increased interest rates.

• Review your statements: Regularly review your credit card statements to monitor your balance and ensure there are no unauthorised charges.

• Seek financial advice: If you're unsure about managing your credit card loans, consider seeking advice from a financial advisor who can provide personalised guidance.

When it comes to credit cards, it’s essential to consider options that can provide structured benefits while offering a range of features that can enhance your financial management. The Bajaj Finserv RBL Bank Credit Card is an excellent option.

Bajaj Finserv RBL Bank Credit Card benefits

• Redeemable reward points on almost every transaction, with accelerated earning potential on online purchases and select categories.

• Welcome bonuses of up to 4,000 points.

• Savings on fuel with surcharge waivers of up to Rs. 1,200 per year at all stations across India.

• Complimentary access to domestic airport lounges.

• Expense management with an EMI conversion option for purchases, bills, and outstanding balances above Rs. 2,500.

• Cash access for unexpected expenses or emergencies with interest-free ATM cash withdrawals for up to 50 days.

• Annual fee flexibility with waivers available when you meet minimum spending requirements per your card variant.

• Monthly discounts and 1+1 offers on movie tickets via BookMyShow.

• Combined savings of up to Rs. 55,000 annually when you leverage these credit card benefits.

While taking a loan on your credit card can offer quick access to funds and flexible payment options, it does come with significant risks. However, when you combine responsible management with the right credit card, like your Bajaj Finserv RBL Bank Credit Card, you can enjoy perks that support your financial goals. So, why wait? Visit the official website or download the Bajaj Finserv app to explore your options today!