How Interest Rates on Credit Card Loans Work and How to Reduce Them?

There are times in life when we face the need for immediate cash for specific financial circumstances. It might be quite difficult to obtain significant amounts of money in such a short period. This is where a Loan on Credit Card can be used. Depending on the credit limit, you can avail a loan amount and use it. In this blog, learn more about this type of loan and how the Credit Card loan interest rate works.

Loan on Credit Card Explained

You can obtain a Loan on Credit Card very easily from your bank. The main advantage of these loans is that they don’t need any collateral or security to pledge. The process is very quick and simple and allows you to get a loan amount linked to your Credit Card limit. Then, you can repay the loan over a certain length of time in smaller payments known as EMIs. 

Is a Loan on a Credit Card Beneficial?

Availing a Loan on Credit Card is beneficial for the following reasons: 

• Quick Access to Funds

Get the benefit of fast access to funds with Credit Card loans. Whenever you need cash, you can always use your Credit Card and stay away from the hassle of lengthy approval procedures or the need to provide paperwork like in the case of other loans. 

• Zero Collateral

The Credit Card loan is a zero collateral loan. It means you don't have to provide any security like property or savings to qualify for it. 

• Easy Repayment Options

Repay the loan easily by making fixed payments or EMIs. This method assists in handling your finances by enabling you to repay the loan in convenient EMIs over a period of time. 

• Competitive Interest Rates

The interest rate for Credit Card loans is competitive, which is easier to pay in the form of EMIs. 

• Flexible Tenure

ICICI Bank provides flexible repayment options for loans taken against Credit Cards. 

Interest Rates on Credit Card Loans 

The interest on a Credit Card loan is typically calculated annually, but it is charged to your account on a monthly basis based on the Annual Percentage Rate (APR). 

The bank determines the rate of interest, which may change depending on the type of card you have or your credit score. It is also important to note that if you don’t pay your EMIs on time then be ready for late fines and penalties. 

Tips to Reduce Interest rates on Credit Card Loans

Managing Credit Card loans effectively can help reduce financial stress and save money on interest. Here are some actionable tips to make the most of your Loan on Credit Cards:

• Pay Your Full Balance Every Month

It's wise to clear your Credit Card balance before the due date to steer clear of interest charges altogether. Credit Cards come with a grace period between the billing and due dates where no interest is charged. Make the most of this time period. Avoid the pitfall of paying the minimum amount as it could result in increased expenses and prolonged debt. 

• Use Balance Transfers Wisely

Transferring balances can be useful for shifting high-interest debt to a card with lower interest rates and cutting down on the interest you pay over time. Just be mindful of doing it too often as it could potentially hurt your credit score. 

• Convert Large Purchases to EMIs

Consider opting for EMIs when purchasing items with a Credit Card loan. This way you can benefit from lower interest rates compared to regular revolving credit balances while being mindful of additional processing fees. 

• Avoid Cash Withdrawals

Try to avoid taking out cash from ATMs using your Credit Card. This is because when you use your Credit Card to withdraw cash at an ATM you start accruing interest charges right away from the day you make the withdrawal. 

• Pay More Than the Minimum

It is very helpful to pay more than the minimum outstanding balance each month. It can help lower your balance faster and cut down on interest costs in the long run. 

• Focus on High-Interest Debts First

When you have Credit Card loans to pay off each month then pay off the one with the highest interest rate first to save on interest charges in the long run. 

Conclusion 

Consider taking a Loan on Credit Card for any financial emergency. In such circumstances, make the most of your financial necessities by using your Credit Card. Whether for managing expenses, significant debts, or emergencies, this financial option may truly save you when you are in need. However, it's crucial to think about the Credit Card loan's interest rate, conditions of repayment, and your capacity before deciding to avail yourself of a loan.