Things To Consider When Applying For A Travel Loan

Millennials, unlike earlier generations, place a higher priority on collecting experiences rather than possessions. Did you know that 62% of Indian millennials travel two to five times every year, ranging from small domestic visits to lengthier overseas journeys?

Banks and financial institutions are now offering loans at attractive interest rates to Indians who travel more than ever before. Travel loans are gradually becoming the preferred credit option, as they are less expensive than credit cards, offer faster disbursement, require less verification, and have more flexible payback terms. Here are some things to consider if you’re thinking about taking out a travel loan:

 

Only take what you need: A travel loan cost can go upto INR 25,00,000, with interest rates ranging from 10% to 21%. However, the bigger the loan amount, the higher the repayment amount. As a result, it’s vital to figure out how much of the trip can be covered by savings before deciding on other needs that can be met with a loan.

 

Examine your credit exposure, including secured and unsecured: Maintaining a solid credit history and a high credit score requires a good mix of secured and unsecured loans. It is not advisable to add to the load with a travel loan if you already have a significant number of active unsecured loans (loans without collateral) such as a school loan, several credit cards, personal loan for travel , and so on.

 

A high number of unsecured loans on your credit report might hurt your cibil score and make it difficult to receive a loan in the future, especially if you need one. Avoid falling into a debt trap by ensuring that your total EMIs do not exceed 30% of your monthly income.

 

Have all of the necessary documentation on hand: Obtaining a travel loan does not necessitate much documentation; nevertheless, if you are a salaried individual, you will be expected to provide verification of your address, identity, bank statement, wage slips, and passport size photographs. The requirements may differ if you are self-employed or unemployed. Some lenders may also want additional information, such as your income, airline tickets, hotel reservations, and vacation plans. To speed up the loan disbursement, check with your lender and maintain all of your paperwork on hand.

 

Consider the following factors while deciding on a payback term: The repayment period for travel loans often spans from 12 to 60 months after the loan is taken out. These tenures’ interest rates will also vary. Though a longer repayment term with a lower interest rate may seem appealing, the truth is that you will end up paying more than if you choose a shorter term with a higher interest rate. Check the lender’s terms and conditions for a prepayment option if you want to pay more because you have some more cash on hand, such as a bonus.

Remember to maintain your account funded for any impending EMIs scheduled for while you are away, in the thick of your travel plans and enthusiasm. Make sure you don’t miss a single payment deadline, as this might have a negative impact on your credit score Also, keep an eye on your credit score and report on a frequent basis. This will allow you to maintain track of your credit portfolio, monitor score patterns, and ensure you’re not taking on more debt than you can manage responsibly.