Short Term Loan is very common in the western world. These are popularly known as payday loans. Though both are technically not the same. The reason I referred both of them is that borrower pay or clear the same once he/she receives next salary. In banking parlance, a loan of up to 1-year tenure is referred as short term loan. You can also refer it as a cash advance. “What’s in a name?” if you need a loan for short term max up to 52 days at zero percent interest rate then this post is for you.
Even in 80’s and 90’s, the concept of the short term loan was popular but those days, the common source to avail loan was friends and family members. As I grew up in 90’s, I remember it was popular to lend and borrow among friends. I learned the concept of the short term loan from my father and his close friends & family members. Many times I also availed short term loan against my next month’s pocket money :). The trust factor was high :). During those days, it was not a taboo to borrow or lend.
In recent times, the concept of lending and borrowing among friends and family members has almost vanished. Today if you ask any of your friend or family members for short term loan, the first conclusion will be that you are in deep financial crisis. These days’ people rely more on financial institutions i.e. banks for short term loan. Another option is private lending. The interest rate is high on short term loan. Recently, I was also in a need of short term loan. I didn’t want to disturb my existing investments. Therefore, I found out a way to avail loan at zero percent interest rate. Many of you might be aware of this trick but i thought of sharing with the readers of this blog. Let’s check out.
How to Get Short Term Loan at Zero Percent Interest Rate
Typically, you are in a need of a short term loan to meet some sudden or unexpected expenses like replacement of home appliances, hospitalization, emergency purchase, pay credit card bill, EMI Payment etc. The key point is that money cannot be arranged at short notice. Thus you need short term loan. This post is more relevant for cases where you cannot fulfill or meet your requirement through credit card.
Assuming you need a short term loan of 1 Lac at zero percent interest rate, you should fulfill conditions.
(a) You should possess a credit card
(b) The credit limit on a credit card should be min 3.33 Lac. The reason being credit limit should not exceed 30% to avoid any negative impact on credit score. In other words, the credit limit utilization should not exceed 30%.
(c) KYC enabled Mobile Wallet
Just to add that KYC process is now very convenient. You can opt for Aadhaar based eKYC. It is paperless and instant. Therefore, in the case of urgent need of short term loan, you can instantly make your mobile wallet KYC compliant.
How it works:
1. I will add Rs 1 Lac to my “Mobile Wallet A” using my credit card. Please note that this is the max amount that can be added to KYC compliant Mobile Wallet. In case I need Rs 2 Lac then I will create another KYC compliant “Mobile Wallet B” :).
2. Now after the money is added, I will withdraw/transfer the money to my bank account. There are NIL Charges/fees for this transfer. Thus I converted my credit card limit to bank balance or hard cash.
Now you must be wondering, what’s the big deal? Why I need to transfer the amount to my bank account, I can use my credit card to meet my short term loan requirement. I agree with you but as i mentioned that the method shared by me is useful in the scenarios where you cannot use a credit card. You can convert credit card limit to bank balance & utilize the funds as a short term loan. The best part is there is zero percent interest on the same provided you payback before the due date.
Why should I avail short term loan utilizing credit limit via mobile wallet?
(i) Pay Credit Card Bill using Credit Card: One of the common queries on my blog is whether I can pay my credit card bill using another credit card. Now by following the steps shared by me, you can pay your Credit Card Bill A using Credit Card B.
(ii) EMI Payment: This is another common query from the borrowers. Many people ask me can I make EMI payment using Credit Card. The technical answer is NO. On the other hand, it is possible by using the method shared by me. In this case, I will load the EMI amount in mobile wallet using a credit card and transfer the amount to the bank. After that, I can conveniently pay EMI
(iii) A credit card cannot be used: There are multiple instances where you cannot make credit card payment. For example, recently one of my readers asked that I need short term loan to pay the school fees of my kids. Now the school will not accept payment through credit card. Therefore, you can convert your credit card limit to bank balance & pay the school fees.
In another instance, one of the reader’s parents urgently needed money. Now, in this case, he cannot pay to his parents through credit card. Therefore, he can use the method shared in this post.
(iv) Save Credit Card Fees: In many cases, for a high value purchase the merchant charge up to 2.5% as a credit card fees. On the other hand, payment through debit card, cheque or cash does not attract any fees. Therefore, you can save on credit card fees. Instead of using a credit card, you can transfer the money to a bank account via a mobile wallet.
(v) Investment through Credit Card: Another query received by me whether I can invest using a credit card. The answer is NO but it is possible if you transfer the money from credit card to bank account via a mobile wallet. The only catch is that you cannot invest for long term. You can safely earn 4% interest rate as an additional income. For example, if I add Rs 1 lac to my mobile wallet on the date of credit card bill then I need to pay back this amount within 52 days. Therefore, I will transfer the amount from mobile wallet to bank account. I will earn 4% interest for 52 days and pay the bill. You can also invest this amount in Liquid Mutual funds to earn a slightly higher return. Again on next credit card bill date, I will repeat this cycle.
(vi) Cash Requirement: Though we are moving towards cashless economy but we might require cash in certain cases even though you don’t prefer to use cash. In other words, digital money cannot be used. If the requirement is big then there is no other option but to transfer the amount to bank account utilizing credit limit.
Words of Caution:
Readers ask me whether loans are good or bad. The answer depends whether you will be able to pay on time or not. In short, if I am utilizing the credit limit of a credit card to avail short term loan then max loan duration can be 52 days if you plan it intelligently. Therefore, if I am sure of payment within 52 days then I will definitely go ahead with the loan as I explained in this post.
To summarize, by utilizing a small loophole in the system you can avail a loan at Zero % interest rate. Recently, to fix this loophole one of the mobile wallets providers imposed 2% fee in case money is added to mobile wallet through credit card. Unfortunately, they have to roll back this fee within 2 days as other mobile wallet didn’t follow the suit. Post UPI and IMPS, the mobile wallets may find it difficult to survive. Therefore, it is highly unlikely that they will fix this loophole. Till that time the borrowers can enjoy short term loan at zero percent interest rate :).
Copyright © Nitin Bhatia. All Rights Reserved.
Online wallets blocked all my cards when I used this trick.. What to do now?
You can create virtual credit card.
you cannot transfer more than 5-10K per month by theses wallets.
The limit varies for KYC and non-KYC mobile wallets.
Greetings Nitin,
Is this advice still applicable? I see two comments which say that credit card getting blocked by the provider of wallets and you cannot transfer more than 10K per wallet.
You also mention full KYC and virtual Credit cards.
With a full KYC can I transfer 1 Lakh each month?
Not sure what virtual credit cards means. Could not find any info on that.
Leonard
Yes. It is applicable. One of the largest mobile wallet provider is trying to plug this loophole but as i mentioned in my post that there so many other mobile wallets you can check out.
You can create a virtual credit utilizing the limit of existing credit card. Kindly check with the helpline of your credit card provider i.e. how to create the one.
Hello Nitin Sir,
I’m a regular reader of your blogs/posts & i found this post very useful. I researched a bit on the above illustrated method & here are my findings:-
1) If you have a KYC approved wallet then you can accumulate upto 1 Lakh Rs.
2) As per RBI guidelines you cannot transfer more than 25K per month to your Bank Account from wallet.
3) For most of the wallets daily Bank account transfer limit is upto 5K only.
4) Some wallet providers are still charging 1% of the Transfer amount as transaction fees even if you are KYC approved.
You can transfer from Wallet A to Wallet B of same wallet provider and then withdraw Rs 25k from each wallet i.e. Rs 50k per day. You can also have multiple SIM’s each linked to one mobile wallet account. Now you can load each account using same credit card but by creating different virtual credit cards. Thus through 4 different accounts you can withdraw Rs 1 Lac in a day :).
In India, people find solution to every problem.
Hi Sir, I am planning to purchase a plot at Hiranandani – Shankarpally – Hyderabad. I have some liquid cash and I may apply for plot loan too.. Please suggest if its good to go with? I am a married women but want to purchase the plot for investment purpose for future.
You have not mentioned the price. It is important to enter at right price. Secondly, it is not preferred to buy an asset for investment purpose by availing loan.