Random travel plans are the best travel plans but we always do not have adequate money put aside to fund such travel plans. To help with such situations, banks offer holiday loans to customers who are looking to travel to either domestic and international destinations. NBFCs and fin-tech companies and online loan providers other than banks also offer these types of loans to their customers.
These unsecured personal loans, generally offer a lower interest rate than credit cards. Even though the interest rates vary depending on the lender you opt for, the interest rates usually start at 11 per cent. If you have not specifically saved for a vacation or want to upgrade your travel plans at the last minute, opting for a Holiday Loan is one of the best financial options available. These kinds of holiday loans provide travelers with the ease of finance that helps them fund their travel without going broke or over utilizing their credit card. Even though credit cards are instant and easier to use, however, experts believe it may lead to a debt trap post-holidays.
Industry experts suggest taking a loan for a vacation has another advantage because one does not have to break their long-term deposits or FDs to pay for such holiday expenses. Irrespective of the purpose of your travel, it is also important to know how to manage your funds efficiently during a trip, especially if you are taking a loan for it.
If you are also planning to take go for a sudden holiday, here are few points you should keep in mind before opting for a holiday lone:
Amount needed: Borrow only how much you require. Borrowing more than you require is only going to lead you to have more debt. Experts suggest one should borrow only as per their repayment capability, and not go overboard. Also while choosing the loan amount, asses your financial needs before finalizing on the loan. Note that the loan EMI doesn’t exceed 50 per cent of your salary and try to maintain a low debt-to-income ratio.
Tenure of the loan: Choosing a loan tenure is of utmost important as depending on the loan tenure the interest rate will be fixed. For instance, the loan interest rate will be higher for a shorter loan tenure, and vice versa. However, with a longer loan tenure, borrowers end up paying more in overall interest payment. You can also take the help of a loan EMI calculator to decide the tenure for your loan, this way you will know the best tenure suited for you in lower interest payment.
Expense Budget: Experts always suggest to create a holiday expense budget, especially when you are going on a budgeted holiday, and sticking to it. This way you will not overspend and have control over your spending limit. People end up spending a lot on an international trip, starting from tickets and accommodation, transport, and food, hence having a budget before going help to keep your finances under control.
Loan repayment: Try to choose a bank with flexible loan repayment options. Some banks have fixed repayment options whereas, some banks offer flexible repayment options. Go through the repayment clause carefully, before applying for a personal loan online. Few banks also charge foreclosure as well as prepayment fees on the outstanding amount.
Insurance: Especially for any contingency like an accident in a foreign country, hospitalization there, or theft and loss of luggage or travel documents, travel insurance is a must. If you already have a health insurance policy that extends your coverage even outside India, travel insurance, in that case, acts as a supplementary health insurance policy.