Cheaper credit than personal loans Avail: Credit Card

When it comes to taking a loan, a credit card is the last thing on your mind. At 36-48% per annum, rolling over a credit card balance is the most expensive form of borrowing. But if you have been a good borrower and paid all your bills in time, your credit card can get you a loan that is cheaper than a personal loan.

?I got a loan against my credit card limit without any documentation and at an attractive rate of interest of 11%. If I had gone for a home loan, it would have cost me nearly the same,? says Delhi-based Satinder Sikri who availed a personal loan recently to meet the shortfall in the downpayment of his house. The math is simple. A personal loan comes at a rate of almost 18%. The EMI for a Rs 1-lakh loan for a year works out to Rs 9,168. But if your repayment record is unblemished, you might get a loan against your credit card limit at 14% from the bank, where the EMI would be Rs 8,978, a saving of almost Rs 200 a month.

What?s more, these loans don?t require documentation and the money is in your bank account within 2-3 days. You can use such loans to consolidate and pay off high-cost debt on other credit cards.

The downside is that your credit limit comes down if you take a loan against it. More importantly, it is easy to fall into a debt trap if you blow away the easy cash on non-essential expenditure. So, go for a loan only if you really need the money and when you have exhausted other options.

Potential gain: A Rs 1 lakh loan for a year on your card will be cheaper by almost Rs 200 a month.