There was a time when people in India did not spend money on travelling. Today is the time when people are very interested in traveling and they do not shy away from traveling even after taking a loan. A report suggests that 62% of Indians travel two to five times a year. This includes short to international travel also. In such a situation, banks and other financial institutions also now provide travel loan facilities at attractive interest rates. Travel loans are fast emerging as a preferred credit option. But compared to credit cards, travel loans are a cheaper option, with faster payouts, less documentation and flexible repayment terms. If you are also going to apply for a travel loan, then you should take special care of some things.
Take as much loan as you need
According to CIBIL, a typical travel loan can range from Rs 10,000 to Rs 25,00,000 and its interest rates range from 11% to 21%. Higher the loan amount, higher will be the repayment amount, hence, estimate how much will cover your traveling expenses. Only after this decide the loan amount.
Assess the risk of your secured vs unsecured loan
The right mix of secured and unsecured loans is important to maintain a good credit history and high credit score. If you already have a large number of active unsecured loans (loans without collateral) such as education loans, multiple credit cards, personal loans, etc., it is not advisable to increase the burden with a travel loan. Having too many unsecured loans on your credit report can negatively impact your credit score. This can hamper your chances of getting a loan in future. Especially during an emergency. Keep in mind that the total EMI to be paid should be only 30% of your monthly income.
Keep all documents with you
Not much documentation is required to avail a travel loan, but if you are salaried then some important documents are required such as your address proof, ID proof, bank statement, salary slip and passport size photograph. If you are self-employed or are not yet employed, requirements may be different. Some banks or lending institutions may also ask for additional information such as your income, airfare, accommodation bookings and travel plans. Contact your lender and keep all your documents with you to speed up loan repayment.
Choose repayment period carefully
Generally, the repayment tenure on a travel loan ranges between 12 to 60 months after taking the loan. The interest rates will also vary on these periods. You may consider a longer repayment period with a lower interest rate, but the truth is that you will end up paying more if you choose a shorter repayment period with a relatively higher interest rate. If you have any extra cash like a bonus, if you want to pay more, also check the lender’s terms and conditions regarding prepayment option.
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