The Bluebirds, who currently have veteran Michael Oakes as their first-choice stopper, pushed through a deal with City on Thursday evening.
Schmeichel kept four clean sheets in his first six games for City at the beginning of the season, and signed a new four-year deal with the club last month.
But he has since fallen behind Joe Hart and Andreas Isaksson, and manager Sven-Goran Eriksson is keen for the youngster to go out on loan to secure some first-team action.
"This does not mean Kasper has no future here, he just needs to get some games," said Eriksson.