During the travel season, most make random travel plans without prior planning and don’t always have sufficient money put aside to fund their vacations. Due to a shortage of funds, some people also avoid or postpone their holidays, but with travel loans and holiday loans so easily available, money is no longer a hindrance when it comes to taking the dream vacation.
To cater to the rising demand of vacationing, banks along with fintech companies and online loan providers in India are offering personal holiday loans both for domestic and international holidays. According to recent reports, mostly young working professionals are taking a break and are traveling to new places for a vacation. Companies are also coming out with new travel packages to many popular locations, which are getting increasingly popular.
When should you take a loan?
If you have to liquidate your savings and lose interest income on long-term savings instruments such as FDs and deposits to spend on your holidays, you should look for other options to fund your holiday. Experts suggest if one has to break their long-term deposits or fixed deposits to pay for such holiday expense, they should instead take a loan for a vacation. However, if you are taking a loan for your holiday, it is important to know how to manage your funds efficiently during a trip. Also, you should only borrow the amount that you are short of for your vacation and not more.
Options to avail loan for travel and holidaying:
Travel companies such as MakeMyTrip, Thomas Cook, and Yatra.com offer travel loan packages through their websites to customers by partnerships with banks and credit card companies. However, experts suggest borrowers should check other options and deals offered by banks directly on their website or from fintech companies and online loan providers.
Personal Loan from Banks: You can take a personal loan up to Rs 5 lakh, which also depends on your loan eligibility and subject to the limit of actual travel expenses. You can also enhance the holiday loan amount by offering the security of liquid instruments such as fixed deposits, Kisan Vikas Patras (KVPs), and NSCs. These loans are also easy to process and come with minimal paperwork. The tenure of these loans ranges from 3 to 24 months. Depending on the lender you opt for, the interest rates of these unsecured loans vary, and range between 11 and 20 per cent, with a loan processing fee of 1-3 per cent. The interest rate on personal loans offers a lower interest rate than credit cards.
Credit Card based EMI Loans: You can use your credit card during your travel and convert the outstanding amount to a credit card EMI loan. As these loans are with your existing credit card, they have no or minimal paperwork. These loans, however, charge relatively higher interest rates compared to personal loans. The interest rate ranges from 24 to 36 per cent. The tenure of these loans ranges between 3 and 12 months. Unlike personal loans, the eligibility of the loan amount is limited to the credit limit on the borrower’s card and also on the destination of travel.