If you are planning to go on a vacation any time soon but are hard pressed for money, you could be tempted to opt for a Travel Now Pay Later (TNPL) scheme. These are similar to the Buy Now Pay Later (BNPL) schemes that enable consumers to buy a product at once and then pay for it in easy monthly instalments over the next few months or a year.
These schemes are offered by a host of travel aggregators such as MakeMyTrip and EaseMyTrip through their tie-ups with fintechs or NBFCs (non-banking finance corporations).
Although different platforms have difference finance schemes on offer but usually these schemes give finance options at zero percent of interest when the entire amount is repaid within a short span of time i.e., 30 to 45 days.
When the loan amount is repaid over a period of time in equated monthly instalments (EMIs), the loan bears a high rate of interest that ranges between 18 and 25 percent.
So, what should the travel enthusiasts opt for? Should they opt for these schemes or hang on to their travel plans instead?
Ideally, one should view travel financing options differently from other types of financing such as those for car, house or even shopping.
While some expenses are urgent and financing could enable investors to meet them without having to defer them to future, travel financing is an expenditure which is usually avoidable and can easily be deferred. So, in case you are contemplating choosing this option, you should consider these key factors:
1. In case you can afford to travel later after you have saved enough, then you should definitely not opt for TNPL now.
2. If travelling is, however, urgent, then make sure to pay the instalments on time because if you skip these instalments, your credit score stands to suffer adversely.
3. Before opting for these schemes, make sure you are willing to return the loan at an exorbitant rate of interest if choosing to pay in instalments.
4. Importantly, do not add on the burden on TNPL if you already have an obligation of a number of instalments. It is advisable to retire the old debts first instead of taking fresh debt – that too for something as dispensable as travel.
To sum up, some travel aggregators offer good finance options to travellers to cover their travel cost in easy instalments, but it is advisable to remain cautious before opting for this since it carries a high rate of interest and can have a bearing on your credit score.