Preapproved Personal Loans on Credit Cards

We often choose to get personal loans from banks when required. Being a customer of a bank, the bank also sends us offers such as preapproved personal loan offers. This is usually when they find that you have good creditworthiness based on factors like your credit history and credit score and income. We often keep getting emails or SMSs from banks offering us such preapproved personal loan and other similar offers.

Preapproved Personal Loan: What is it?

A preapproved personal loan refers to an offer made towards an existing customer by a lender due to his/her strong credit profile.

Hence, here, it is the lender that initiates the loan offer rather than a customer requesting one from a lender.

Preapproved Personal Loan on Credit Card

When talking of a preapproved loan on credit card, this is a type of loan where a certain part of your unutilized credit limit is offered as loan.

When we have a credit card of say, a bank, the bank may choose to offer us a preapproved loan if they find us with a good level of creditworthiness. Usually, going with such a loan requires no documentation. This is because you have already submitted the needed documents at the time of applying for the credit card. And your credit history, credit score, income, employment status, etc. are known to the bank.

It should be noted that loan on a credit card is different from cash withdrawal.

Also note that sometimes the customers themselves request for such a loan on their credit cards. In this case, the bank is responsible for approving or disapproving the loan request.

Sometimes, the bank may offer you a credit card loan, but reject or disapprove the same even after your acceptance, based on your employment status, income, creditworthiness, etc. or a change in any of these.

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Some Features of Preapproved Personal Loans on Credit Cards

Below are some features of preapproved loans on credit cards:

• Eligibility: The option to getting a pre-approved loan on a credit card is only for some select credit cardholders.
• Borrowing Limit: The limit that can be borrowed in this type of loan is up to the pre-approved limit as set by the bank/lender/provider.
• Approval Time: The loans are usually approved within a time span of 24 hours.
• Borrowing Procedure: As discussed, this loan type is borrowed after an offer from the lender or a request/application by the credit cardholder for the same.
• Documentation: As said, no additional documents are needed.
• Disbursement: The loan amount is directly credited to the borrower's savings or current account, but for this, the account needs to be with the same bank. Otherwise, disbursement occurs through cheque.
• Repayment: For repaying the loan amount, EMIs are added to your monthly credit card statements.
• Tenure: The tenure to repay the loan amount is usually from 1 to 5 years.
• Interest Rates: The interest rates charged are, however, quite high, especially when compared to those on personal loans. Moreover, they can vary from bank to bank, and from customer to customer as well.

How Good Are Credit Card Loans? When Should You Go with This Type of Loans?

One can use their credit Card loans to enhance their credit score by making timely, complete payments. They are good enough when you own a credit card and require emergency funds.

Here are some aspects that make you more likely to have such loan:

• When you are seeking immediate cash, as this type of loan gives you access to money immediately
• When you cannot wait for a week's time for the approval and disbursement
• When you need instant access to cash but you loan amount requirement is not too high
• If you do not qualify to get a personal loan approved
• When there is a low rate of interest offered for repayment, especially when compared to personal loans

Loan on credit card is a very quick and easy way to avail loan to meet financial needs.

How Do Credit Card Loans Compare to Personal Loans?

Credit Card loans are often compared to personal loans.

Personal loans differ in many ways. They are more appropriate when you need a higher loan amount, when you can wait for a week to get approval and disbursement, and when you need loan to pay someone or some business that does not accept credit cards.

Personal loans also come with options for you to choose from. They require documentation and are open to non-existing customers as well.

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