5 Tips to Lower Your Credit Card Loan Interest Rate

Credit cards have become a common mode of payment these days. Whether you want to purchase groceries, own a gadget, book tickets, or shop online, you can pay for almost anything using a credit card. However, you can also apply for a credit card loan if you need urgent cash higher than your credit limit. It is a pre-approved credit card facility that makes funds instantly accessible without hassle, thus saving your time and effort during an emergency.

In the following sections, we will discuss the factors affecting credit card loan interest rates and tips to lower them.

What is a Loan on a Credit Card?

A loan on a credit card is a pre-approved facility that does not require you to undergo extensive documentation and eligibility requirements. Many credit card providers offer this facility to customers based on their credit history, expenditures, and transaction patterns.

How Does Credit Card Loan Work?

Instant access to emergency funding is the most significant advantage of a credit card loan. Whether you need money to pay education fees, consolidate debt, handle a medical emergency, or go on a vacation, the approval and disbursal are easy and instant. As an existing credit card holder of your preferred service provider like ICICI Bank, you can apply for a loan against your credit limit at attractive interest rates. Moreover, the documentation requirements are minimal and you can repay the loan in a tenure of up to 60 months. 

You are eligible for a loan on a credit card if you have a good track record of timely repayments and transaction patterns. Once your loan gets approved, you receive the loan amount directly in your savings account with the same or any other bank. You can use the finance company’s website or mobile app to apply for a loan on a credit card.

Factors Affecting the Credit Card Loan Interest Rate

Finance providers determine the credit card loan interest rate based on several factors, including the following:

• Credit Score: Before approving your loan on a credit card, the finance provider will check your credit score to determine whether you can manage the loan well to ensure timely repayment. This number indicates your past credit behaviour, based on which the credit provider determines your repayment intention and capacity. The higher the credit score, the lower your credit card loan interest rate.

• Repayment History: A loan provider will approve your loan on credit score only if you have repaired your credit card bills on time. Any outstanding balance indicates you are already in a financial crunch and have a higher chance of missing EMIs. Not paying the credit card bills on time reduces your eligibility for a credit card loan. Even if the company approves the loan, it may charge a higher interest rate.

• Transaction Patterns: Transaction patterns largely determine your credit card loan eligibility and interest rate. Every individual has a pattern of spending money. Some are frequent travellers, while others are online shopping enthusiasts. If the credit card company notices any substantial changes in your transaction patterns, they may become alert and reject your loan application. Inconsistent transaction patterns also lead to higher interest rates even upon approval.

• Credit Utilisation Ratio (CUR): The credit utilisation ratio is a crucial number indicating the percentage of credit limit you consume on average. A CUR above 50% indicates credit-hungry behaviour, making credit card loan approval harder to achieve. Even if the company approves it, it might charge a higher interest rate than normal.

Tips to Lower the Credit Card Loan Interest Rate

Here are a few tips to obtain a credit card loan at the lowest interest rate:

1. Always Pay Your Credit Card Bills on Time: If you are an existing customer of the credit card provider, they already understand your credit behaviour. They might not approve your application if you habitually miss or delay your bill payments. Therefore, prioritise credit card bll payments to project yourself as a responsible credit borrower. Consequently, the credit card company will approve your loan without hassle and charge a reasonable interest rate.
2. Improve Your Credit Score: You build a credit score gradually with consistent repayments and responsible credit behaviour. Since this number is crucial in determining your loan eligibility and interest rate, keep it high to get the best deal. Some tips to improve your credit score include paying all bills on time, borrowing only when necessary, diversifying the credit portfolio, reducing the Debt-to-income ratio (DTI), clearing outstanding balances, etc.
3. Keep a Check on Your CUR: A credit card gives you a monthly credit limit. You can shop up to this limit and pay after 45-60 days. However, you must be vigilant before utilising the entire credit limit each month. Avoid using the whole credit limit by keeping the credit utilisation ratio below 50%. For instance, if you have a credit limit of Rs. 1 Lakh, avoid using more than Rs. 50,000 on average. 
4. Use Credit Card Sparingly: Although a credit card is an ideal financial instrument that lets you buy now and pay later, do not misuse it for lavish expenditures. Make a budget and keep your expenses low. Avoid impulsive shopping using your credit card to keep the bills low and manageable.
5. Build a Loyal Relationship with the Credit Company: If you have a pleasant relationship with the credit card provider, you may negotiate on the credit card loan interest rate. You must build this relationship with consistent transaction patterns, timely bill payments, and responsible credit behaviour. When you need urgent funds, you can leverage your relationship to obtain a loan at an attractive interest rate.



Obtaining a loan on a credit card is easier than before, and understanding everything about them is certainly essential. Now that you know the factors affecting the credit card loan interest rate, you can use the tips mentioned here to get the best deal and save money.