Is it a wise idea to pay for your holiday in instalments? How can you do it?

Vimal Joshi
Updated: 15 Dec 2021, 04:55 PM IST

Want to travel to Swiss alps and worried over your finances? Not anymore. You can borrow money to travel with your loved ones anywhere in the world, and repay the money in monthly instalments. Read further to know more about it

Travel loans are offered by several banks and NBFCs to cover the cost of airfare, hotel bills and everything in between.

Travel loans are offered by several banks and NBFCs to cover the cost of airfare, hotel bills and everything in between.

If you are planning your next holiday in Europe or Maldives but fretting over the depletion of your savings, then you can raise a travel loan and get sorted. Travel loans are offered by most banks and some NBFCs to cover the cost of airfare, hotel bills and everything in between.

There are several options to borrow money to travel anywhere in the world – India or overseas. Essentially, the money borrowed to travel is given as an unsecured personal loan and treated as such. In other words, you do not need to give any collateral to the bank to raise this loan, and you become eligible for this based on your income and your potential to repay.

And just as in personal loans, the repayment can be done in one to five years.


You can follow the following steps to borrow travel loan from a bank or NBFC:

1. First of all, you can check for your eligibility on the bank’s website. If you have an account with HDFC Bank, for instance, you may check your eligibility on your net banking account.

2. The next step is to apply for the loan along with necessary documents such as your income tax (I-T) return, salary slips, ID proof, address proof, etc.

3. The bank will take some time to approve the loan based on your ability to repay in time. If you are already a customer of the same bank, the approval is likely to be given immediately.

4. After the loan has been approved, the entire loan money will be transferred to your bank account.

5. The repayment usually happens through direct debit from your bank account in equated monthly instalments (EMIs). You can also pay via cheque, NEFT or IMPS.

Most commercial banks such as HDFC Bank, ICICI and Kotak Mahindra offer travel loans. The other alternative is to approach an NBFC such as Bajaj Finserv and Tata Capital which also offer personal loans for holidays for an amount up to 25 lakh.


Benefits and disadvantages

There are several benefits of raising a personal loan to travel. The first and foremost is that one does not need to wait to build savings over a period of time to be able to travel. If you need 3 lakh to travel and you are saving 15,000 a month for this, then it will take you around 20 months to save this money.

Alternatively, you can borrow and travel now, and repay the money in next 20 instalments, with a little extra for interest.

Also, just as a personal loan, your rate of interest is fixed and you don’t need to worry over the fluctuating rates during the course of your loan.

However, there are a few disadvantages as well. Just because it is a personal loan, the rate of interest is usually high — between 11 to 20 percent per annum. So, you end up paying far more than what you borrowed to travel.

Also, if you skip your EMIs or fail to pay for a few months, your outstanding amount will keep mounting, thus adding the repayment burden.

Another disadvantage is that this loan will not add anything tangible to your set of assets such as a car or property. When you pay interest for a loan that helped you buy a property, you might take comfort in the fact that you created an immovable asset. Similar is the case with a car.

There are multiple options to borrow money for travel.

But when you have spent money on travel, you created nothing tangible to feel good after you return from the journey. So, psychologically speaking, you might not like paying a high rate of interest for a week-long sojourn to an exotic place.

We can summarise that a travel loan is a facility given by banks to those who can’t afford to shell out a fortune for travel, nor do they have the patience to build savings for a year or two.

For such travel freaks, banks offer travel loans.


First Published: 15 Dec 2021, 04:55 PM IST
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