October 26, 2018
Travel Loan, you must have heard people talking about it or got to know about it while surfing the internet. Before I give details on it, let me give you a short intro.
Most of us have a list of places to travel before you retire. Sometimes, it so happens that you end up settling for less and plan a trip to a place which was never on the list just because you are short of funds. Or even if do go to one of the locations from the list, you try to settle for less be it flight tickets, accommodation or indulging during the trip. The point is, why to settle for less when you can enjoy everything the way you had planned. How? Travel Loan is the answer.
It is a type of Personal Loan, or you can also call it ‘unsecured debt’ with fixed payment terms and usually has a fixed interest rate. Well, it is like travel now, pay later in easy instalments.
How to get a Travel Loan?
Banks in India and other non-banking finance company offer Personal Loans at attractive rates. Unlike car loans, the end use of a Personal Loan doesn’t matter to the lender. Most commonly, people use it to pay for vacations, wedding, home renovations, medical emergency and more.
Online lenders may also ask for your educational and employment history during the process of application. You may also be asked to provide the contact details of your current employer and a few references. These information helps the lender to bolster your application, especially if you have a less than a stellar score and thin credit history.
What's the current interest rate on Travel Loans?
Like any other loan, Travel Loan also comes with an interest rate associated with it. Currently, the interest rates on such loans are varying between 11.49% and 21%. Depending on your Personal Loan eligibility, you can avail a loan amount of up to Rs. 25 Lacs. You can use our eligibility calculator to know yours.
Travel Loan Vs. Credit Card
Using a credit card to pay for your vacation is also an option as they allow an interest-free period of approximately 20-55 days. If the credit is not paid off before the 0% rate period ends, you could get hit with a higher interest rate. However, a credit card does come with benefits like purchase protection and warranties, travel benefits, reward points, etc.
Well, if you might need more time to pay off your debt and require help staying on track, a Personal Loan for travel with fixed payments may be a better option. It makes more sense, as you get a lower interest rate on loan.
Structurally, Personal Loan and credit card are similar. But one thing that you might not be aware of is that Personal Loans and credit cards are treated differently on your credit reports. A credit utilisation ratio over about 30% may reduce your scores.
Types of Travel Loan:
- Secure loan: Lenders allow you to use your expensive house items or car as security against a more competitive deal with a lower interest rate. Secured Travel Loan helps you save bucks over the life of the loan.
- Unsecured loan: It is alright if you do not want to put your asset as security, you can still avail the benefits of an unsecured Travel Loan. In this case, the lender the asses your loan eligibility based on your savings and credit history.
- Fixed interest rate: The last thing you would like to be worried about on your vacay is fluctuating interest rate on your Travel Loan. Such loans are usually less flexible than variable ones. However, it comes with some traps and a major one being a break cost fee if you are trying to pay it off earlier than the agreed term.
- Variable interest rate: A loan with variable interest rate has some better features like redraw facility, extra repayment and flexibility to choose your repayment cycle. Generally, variable rates can be lower than the fixed interest rates.
Both the forms of credit have its own attractive benefits and a few notable drawbacks. So, the ultimate choice is up to you. It is always better to compare your options and make an informed decision.