vehicle loan

Why shouldn’t you pay a vehicle loan with your credit card?

Are you using a credit card and planning to pay a vehicle loan?

If yes, there are facts that you should be aware of. A credit card is undoubtedly beneficial when you need to purchase something or meet any financial emergencies, but you don’t have the cash in your savings account. But deciding to pay the vehicle loan with your credit card might be a wrong decision in the long run. 

This is why you need to know more about paying a vehicle loan through a credit card before you make any decision. In addition, you also need to know why it is not an ideal option to pay the loan, even when the deals sound lucrative. 

Higher transaction fee

Usually, most credit companies decide a certain period for borrowers to pay off the vehicle loan. During this time, the additional interest charged on the loan amount is 0.

But suppose you cannot pay off the entire loan easily. In that case, the credit card provider will charge a lot on every transaction, thereby increasing the total repayable amount. 

Also, the time allowed to pay off the vehicle loan is so small that most people can’t complete the payment. This makes it more difficult to avoid additional late payment charges or overhead expenses. 

The repayment term is low

Usually, the repayment term for vehicle loans with a credit card is low. You will only get the bandwidth of 12 months to 18 months for repaying the loan, regardless of how much you borrow. 

This is why you should know how much bandwidth the credit card provider offers you to repay the loans.

On the contrary, when you traditionally pay the vehicle loan, you will have the advantage of choosing a longer repayment term that will reduce the EMI amount you need to pay monthly. 

The interest charged is high enough

Another thing you need to know is that the vehicle loan late payment interest rates charged while paying with a credit card are quite high. Plus, private credit card providers’ rates are higher than public ones. 

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For instance, if you have to pay 7% late payment interest on a regular vehicle loan taken from the bank, the credit card company will charge a 12% to 14% late payment interest rate, regardless of your credit score or the principal amount.

In other words, you have to pay more EMI each month than the traditional loan for the same repayment term and principal amount.

Lowers your credit score

Also, vehicle loans paid through credit cards might lower your credit score. If the score is less, the interest will be high, making it difficult for you to pay the loan. 

On the other hand, if we consider the traditional way of paying the vehicle loan, your credit score won’t be hampered to a great extent. This is one of the major drawbacks of paying a vehicle loan with a credit card. 

Less flexibility 

On top of that, when you want to pay the vehicle loan with a credit card, you won’t get enough flexibility in choosing the repayment term or getting tax exemptions. As a result, you will suffer more losses than saving money through loan repayment. 


In this article, we have walked you through some of the major problems you might face if you pay a vehicle loan with a credit card. So, based on the illustrations, it is your call whether you want to deal with these hassles or would like to wait for a couple of months and traditionally pay the vehicle credit.