By Ajay Sharma, President and Founder – Abhinav Immigration Services
Are you ready to head off to the next destination abroad? High on travel excitement but low on budget? Is your international trip unplanned? Do you need extra cash for holidays? No worries, we have got you covered. Financing your journey need not give you nightmares, as various banks in India offer personal holiday loans for domestic and international vacations. Not only banks but fintech companies also provide this facility to travel enthusiasts.
The rate of interest against these unsecured loans varies depending on the bank. However, most travel loans attract a minimum interest rate of 10.75 per cent per annum for up to Rs 40 lakh. The repayment tenure lasts up to six years.
Since various banks now give travel loans, money lenders, and financial institutions, taking money for your dream vacation isn’t a hindrance. It will help if you consider the following factors while applying for a holiday loan to proceed with your travel plans.
Read the pointers below before you take out a holiday loan:
Stick to your budget
With every holiday season, money lenders greatly lure borrowers into taking out a travel loan to cover their holiday expenses. Banks have a website page dedicated to “holiday loans” to keep customers aware of this route and bring in some extra cash for their exotic trip.
No matter how fancy it may seem, never try to go beyond your budget. You can enjoy the same destination with the minimum budget as well. Applying for a personal loan for travel can be tempting, but we should be careful of how much money we need. Taking the entire amount that you are eligible for isn’t sensible. Instead, it will help you consider the portion of your holidays you can manage with your savings. Then, plan a budget and take a travel loan for the remaining amount.
Regardless of your reasons for buying a holiday loan, it’s important to remember that you are borrowing money. Therefore, it is highly critical to choose the tenure wisely. The monthly payment and EMIs may sound attractive and sometimes affordable, but don’t forget you agree to make payments for years. Opt for a travel load with a tenure of 12 to 60 months, meaning you can repay the loan over five years. While the five-year period may have low-cost EMIs, one must not overlook the considerable interest it will attract. The longer the duration, the higher the interest burden will be.
Hence, it is sensible to pick an option with the shortest time, in which you can pay the money back with less interest.
Keep your credit score in mind
Before applying for a personal loan, familiarise yourself with your credit score. Your credit score is an essential indicator that lenders check to evaluate your ability to repay loans. A credit score is a three-digit number that summarises your entire credit history. While applying for a loan, check whether your credit score and credit mix are high. If you already have several unsecured loans, such as credit card loans, personal loans, etc., we advise you not to apply for another loan without clearing the current ones. Please note that multiple unsecured loans compared to secured loans in your credit mix can harm your credit score. It may also hinder you while applying for an emergency loan.
Applying or not applying for a travel loan is a personal choice. But before you fall for the hype, make sure you are buying it for the right reasons with proper financial planning and budgeting.