Can SBI Credit Card Loan Act As An Alternative To The Option Of Personal Loan?
Most of us are aware of personal loans’ prevalence, right? But what about credit card loans, which have recently emerged as a personal loan substitute? Users of credit cards who are qualified for both credit card loans and personal loans frequently struggle to decide which course to take.
So, in order to assist you in making your decision and determine which loan choice is better for you, below is a comparison of the two:
Loan qualification
Lenders evaluate a borrower’s credit history, monthly income, employment history, and other variables before choosing whether or not to offer a personal loan. On the website or app after applying, you may also check the status of your personal loan.
However, the SBI credit card issuer chooses which cardholders are qualified for a pre-approved loan when a loan is secured by a credit card. This choice is primarily based on the card type, spending habits, and history of bill repayment of the cardholder. Borrowers must already be credit card users in order to borrow money against a SBI lifetime free credit card from the card issuer; however, there is no necessity for borrowers to already be in a relationship with the lender in order to qualify for a personal loan.
The interest rate in effect
Depending on the lender and the borrower’s credit history and score, personal loan interest rates might range from 10 percent to 24 percent. The interest rates offered for loans secured by credit cards are normally about 1% higher than those charged for personal loans. Therefore, if you can wait for the loan disbursement for no more than a week, it would be prudent to choose the personal loan path.
The processing time and associated costs
A loan that is secured by a SBI lifetime free credit card frequently has one of the quickest processing times when compared to other types of credit facilities. After applying for the loan, the money can be taken out of the account within a few hours. Existing cardholders who are able to meet the eligibility standards may bypass the necessity that they provide physical documentation since loans against credit cards are pre-approved. Additionally, certain card issuers guarantee that the money for these loans would be disbursed immediately. To apply for the loan, a credit card holder only needs to submit an online application using internet banking or by calling customer service, assuming they are qualified. Processing charges for SBI credit card loans could be as high as 2.5 percent of the total loan amount.
In the case of personal loans, the applicant must present pay stubs, Individual Tax Return forms, and other evidence relevant to the borrower’s identification and eligibility before the loan can be disbursed. Personal loans are normally disbursed within two to seven days of the loan application being submitted because the document verification process takes some time. Checking the status of your personal loan application online will keep you informed of its progress. Although the processing costs involved can reach up to 3% of the loan amount, many lenders waive these costs around the holidays or as part of special promotions.
The loan’s amount
The loan limit, set by the card issuer, is the maximum sum that may be borrowed using a SBI credit card as security. The cardholder’s credit limit is temporarily restricted to the amount of the approved loan, which may limit the cardholder’s capacity to make purchases. However, as long as the borrower continues to make the appropriate monthly payments on the loan’s EMIs, the credit limit will eventually be restored. Some credit card issuers like in case of SBI lifetime free credit card have begun giving users loans in the form of credit cards, even when the available credit limit on the card has been reached.
Contrarily, the amount of a personal loan normally ranges between 50,000 and 20 lakh, however some lenders claim they may approve loans up to a maximum of 40,000 lakh rupees. Remember that the personal loan amount that is really granted depends largely on factors like the borrower’s ability to repay and the term of the loan that is selected. Also keep in mind that personal loan interest rates frequently change depending on the loan size.
Duration of loan payback
Most creditors would extend the maximum payback duration for a personal loan up to seven years, but the normal repayment period for a personal loan is between one and five years. Also keep in mind that you can use a personal loan status tool to track the status of your application, just like you can use an online emi calculator to determine the correct emi by selecting the appropriate duration.
The repayment period for a loan secured by a SBI lifetime free credit card, however, might be anywhere between six months and five years.
Payments in advance
Prepayment penalties for personal loans might be as much as 5% of the total amount borrowed, depending on the lender. Banks, particularly those in the public sector, do not, however, apply prepayment penalties since personal loans from banks are frequently offered at variable personal loan interest rates. Keep in mind that, in compliance with the RBI’s recommendations, banks cannot apply prepayment costs on retail loans with variable interest rates. Don’t forget to check the status of your personal loan after applying for one so that you won’t have to worry about whether your application was accepted or denied.
SBI credit card issuers frequently charge prepayment fees of up to three percent of the total amount of the loan that is still unpaid when credit cards like SBI lifetime free credit card are used as collateral for loans. Prepayment fees must be compared along with other crucial factors such as applicable interest rates, repayment tenure, loan amount, processing fees, and so on before choosing the type of loan and the lender because they can consume a sizable portion of the total interest savings generated upon making the prepayment.