Credit Card Loan

Harley Finance

A credit card loan can be defined as the amount of money you borrow when using your credit card. With a credit card, you can buy things even when you don’t have enough funds or when you are not willing to spend your cash. People prefer to shop using credit cards because they are convenient, secure, and easy to track.

When you shop something via your card, the issuer can lender you the credit to the shop. You will be required to repay the amount rendered at a later date. Once the grace period has elapsed, you will be required to pay the accrued interest on that loan.

How does a credit card loan work?

A credit card allows you to spend money when you don’t have sufficient balance in your card. It’s similar to having a loan for the amount you incur using your card. The maximum amount you can spend is determined by your credit card limit.

If you pay the bill in total every month, you will not be charged the interest on the amount you borrowed. The case for withdrawals is different since you are charged interest daily from the time you took cash.

You should avoid the cash-out option when using a credit card. This is because this option attracts an interest rate of 4 percent or more based on the credit card issuer. Cash withdrawals usually attract higher interest rates when compared to purchases.


Difference between personal loans and credit cards

Are you planning to borrow money to consolidate debt or cover an expense? There are various methods you can use to finance your needs. What comes in people’s mind when planning to borrow money is credit card loans and personal loans. Some people don’t know which type of loans between the two is suitable for their needs.

Credit cards and personal loans can lend you the cash you need instantly, but each one of the options has its advantages and disadvantages. The following are some of the things you need to know before you can borrow.

Personal Loans

Some people are new to term personal loans but familiar with credit cards. Personal loans allow one to borrow money for different reasons, such as home improvements. Personal loans can be obtained from various lending institutions such as banks, credit unions, and even from online lenders.

The working of personal loans is not different from that of auto, mortgage, and student loans. You apply the amount you wish to borrow, and the lender uses your credit score and history to evaluate whether you qualify for the loan and at what interest rate. With a good credit history, your interest rate will be lower. You will be required to pay the loan in monthly installments up to the time outstanding balance is paid off.

Personal loans vs. credit cards

Personal loans are ideal for more substantial expenses that take time to pay off, whereas credit cards are suitable for small expenses that are paid off a bit faster. This is because credit card loans carry higher interest rates when compared to personal loans, so carrying a balance on a card for an extended period can be very expensive.

Repayment period

Credit card loans usually have a short term repayment period when compared to personal, which has a long term repayment period based on the amount of loan you have borrowed.

Higher payments

Personal loans have a set term, and that’s why they generally require higher minimum payments when compared to credit cards. Personal loans higher monthly payments are only suitable for individuals who don’t have a limited disposable income.


Personals loans don’t encourage people to keep borrowing more money, unlike credit cards.

Things to consider before getting credit card loans

Credit limit

This refers to the amount of money the issuer is ready to let you borrow. The amount you qualify is dependent on your credit history. You don’t want to be in a situation where you are close to stretching your credit limit because it can negatively affect your credit score. There are credit card issuers who have lowered the customer’s credit limit to an amount that is below their actual balance.

Fees and Penalties

There are several ways credit card issuer can make money from off you — the charges involved in transactions like the transfer of balances, cash advances, among others. Penalty charges are also imposed when you fail to pay the bill on time.

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