Credit card loan or line of business credit: Which is the better option?

Operating a business can be difficult, especially when there is a lack of sufficient capital. Depending on the size and scope of your company, several lenders may reject your credit applications as well. At such times, availing of loans on your business credit cards can just come in handy.

Financiers not only offer such cards with pre-approved credit limits to entrepreneurs for various transactions but also provide options to avail of this limit as a loan when necessary. Thus, rather than facing rejection from creditors when you apply for business loans, you can opt to convert your card’s sanctioned limit into your business’s source for capital.

How Does A Loan On A Credit Card Work?

Regardless of whether you use business credit cards or personal cards, a loan is always available against such financial products. Although a loan on a credit card is an unsecured form of debt, financial institutions consider your pre-approved credit limit as a security for such loans. Apart from repaying the principal sum, borrowers of these credits also need to fulfill their interest liabilities.

One thing which you must remember here is that while you are servicing this loan on a credit card, you can no longer access the credit limit attached to that particular card in question. After repayment is complete, the credit limit on this card is restored to its normal state. Thus, you must carry a distinct idea regarding how to repay such credit card debt within the allotted time to ensure regular availability of credit.

Why Is A Credit Card Loan A Better Alternative To Business Credit?

Besides the stringent eligibility criteria for availing a line of business credit, other factors may also force one to reconsider such an option. Several lenders in India may be reluctant to offer the extent of financial assistance that your business requires.

Loans on business credit cards, however, do not come with such drawbacks. Here are some of the benefits of financing your company can avail through credit card loans –

• The principal amount is pre-approved

One does not need to worry about how much he/she can avail as a credit card loan simply because the limit is pre-approved by the card provider. While an individual or business cannot apply for a higher amount, he/she can easily avail of any sum within that limit as a loan.

• Minimal documentation required

Credit card issuers already keep a record of your details with them, including your KYC, income, revenue figures, and more. Thus, when you opt for a loan on a credit card, no additional document submission is necessary. It accelerates the entire lending process, allowing businesses to acquire funding quickly in case of emergencies.

• Credit card loans do not require collateral

Another significant benefit of opting for a loan on a credit card is that it does not require a guarantor or any form of collateral. Since these are unsecured forms of credit, financial institutions extend such advances based on trust and the applicant’s credit history. Without a need for collateralizing assets, the borrowing process for such loans becomes simpler.

The points mentioned above are some of the reasons to opt for a loan on a credit card instead of applying for a line of business credit.

How To Apply For A Credit Card Loan?

Follow the steps mentioned below to apply for a loan on your credit card –

• Credit cardholders can apply for such a loan online or offline.
• For the online application, visit the card issuer’s website and navigate to the section for credit card loan application.
• Offline applicants can visit the financial company and complete the process in person.

Some cards, such as the Bajaj Finserv RBL Bank SuperCard, allow users to convert the credit limit into interest-free loans for tenures of up to 90 days. If your business can repay the sum within this time, no additional interest is levied.

The issuer of the said card also provides pre-approved offers to expedite the credit-availing process. These offers are available on credit cards, personal loans, business loans, and several other credit options. You can check your pre-approved offer by submitting your full name and contact information.

Take advantage of your business credit cards during your time of need. Such financial tools can help breathe new life into your struggling enterprise and provide the much-needed financial help at the shortest notice.