Should You Go For An HDFC Credit Card Loan Or A Personal Loan for a Medical Emergency?

Business Loan

Personal loans are a fantastic borrowing choice for people who need money right away because of their quick disbursement, low documentation, zero restrictions on how they can be spent, and the lack of collateral need. Credit cardholders, especially those who make timely hdfc credit card payments, on the other hand, have an additional option to accomplish the same goal in the form of a loan against their credit cards. Because the product features of these two loan alternatives are so similar, selecting between the two can be a difficult decision for credit cardholders.

Let us now do a comparison examination of both of these loan choices in order to aid you in determining which is the most advantageous of the two, especially when in a medical emergency:

Qualification criterion: When determining loan eligibility, lenders consider a variety of factors related to the applicant’s credit history. The applicant’s monthly income, credit score, monthly loan payback requirements, employment stability, and employer profile are the most important factors to consider. 

HDFC bank credit card eligibility for loan against credit card, on the other hand, is different. It is a pre-approved offer sanctioned by credit card issuers to their select existing cardholders primarily on the basis of their spending pattern, card type, credit limit, and bill payback history, among other factors. However, unlike credit card loans, where you must already be a cardholder in order to take advantage of the pre-approval feature, there is no such requirement to already have a relationship with the lender in order to take advantage of a personal loan.

Amount of the loan available: For personal loans, the loan amount can vary considerably between Rs 50,000 and Rs 25 lakh, with some banks and non-banking financial companies (NBFCs) claiming to be able to grant credit amounts of up to Rs 40 lakh in some cases. 

If you take a credit card loan, the amount you can borrow is limited to the amount of the credit limit that has been set by the card issuer. Some issuers may offer it over and above it, too, if you have been making timely hdfc credit card payments and the issuer has the variant of credit card loan to offer to you.

While the credit limit is temporarily restricted to the amount of the sanctioned loan as per your hdfc bank credit card eligibility, it is gradually restored as and when the EMIs on the credit card loan is paid in whole and on time. Although some credit card issuers are reluctant to extend credit above the credit limit offered on the card, based on the cardholder’s repayment capacity and historical payback behaviour, among other variables, some issuers are willing to extend credit beyond the credit limit. Choosing this option has the advantage of leaving the cardholder’s credit limit intact and ready for use in the course of normal credit card transactions.

Time required for processing and disbursal: Personal loan applicants must provide their ITR forms/payslips, as well as other supporting documentation, in order for their loan application to be completed by the lending institution. Personal loan disbursements may take up to 2-7 days due to the fact that the verification of these papers can take some time. However, some lenders claim to be able to disburse personal loan far more quickly than others, particularly in the case of pre-approved loans.

When it comes to lending against credit cards, it has one of the quickest processing times out of all loan facilities.

These loans are often disbursed within a few hours of the applicant submitting an application, with some card issuers claiming to offer near-instant disbursement as an additional perk. Furthermore, because a loan against a credit card is pre-approved in nature and mostly given to users who have been disciplined with hdfc credit card payment, qualified cardholders are not required to submit any physical evidence. 

Applicable Interest rate: Because there are so many banks and non-bank financial companies (NBFCs) that offer personal loans, the interest rates on personal loans can vary considerably and can range anywhere from 10 percent to 24 percent p.a., depending on the lender and the credit profile of the borrower. 

On the other hand, the interest rates on loans secured by credit cards are often a notch higher than the interest rates on personal loans offered by the same lender for the same credit profile in the majority of cases. But credit card interest rates also depend on the customer’s hdfc bank credit card eligibility for the loan. When determining the interest rate for a pre-approved loan, the credit card issuer takes into account the cardholder’s credit score, hdfc credit card payment history, credit card type, employer’s profile, employment profile, and other relevant variables.

Loan repaying period: The repayment period for personal loans is typically between one and five years, with some lenders giving a minimum repayment period of six months and a maximum repayment period of six to seven years. The length of a loan against a credit card, on the other hand, can range from 6 months to 5 years. 

Remember that payment of the dues after the due date can result in finance charges and a late payment fee, whereas failure to pay even the minimum amount due will result in an adverse impact on your credit score. Therefore, make sure to select the loan tenure that corresponds to your ability to repay the loan. Also, remember that the final tenure that you get will depend on your hdfc bank credit card eligibility as assessed by the lender.

Fees for processing transactions: If you take out a personal loan, the processing fees can range from 1 percent to 3 percent of the total loan amount. Whereas when taking out a loan against a credit card, most lenders charge processing costs that can range from 2 percent to 2.5 percent of the loan amount.

So, before deciding on a loan option, make a comparison between the processing fees charged on personal loans and the processing fees levied on loans against credit cards, as the processing fee charged can make a significant difference in the overall cost of a loan, particularly in the case of a larger loan amount. Comparing this fee is especially important for those customers who make timely and regular hdfc credit card payment and are eligible for both credit card loans as well as a personal loans.