A travel loan is a Personal Loan that one borrows to finance travel expenses such as airfare, accommodations, tours, and other related expenses. Borrowers can use a travel loan to pay for their dream vacation, visit friends and family, or attend a conference or event. Travel loans typically have lower interest rates than standard credit cards rate. Plus, they offer a quick and convenient way to finance travel expenses without dipping into savings or putting charges on a credit card. A good credit score and a steady income are must-haves to be eligible for a travel loan. This article provides information about Personal Loans and the things to consider when applying for a travel loan.
Things to Know About Before Travel Loan Application
When considering a loan for your travel, you must do the planning for it. Like packing for travel is necessary, checking these four things is also vital for a travel loan.
- Take what you require: Typically, a travel loan can range from Rs 50,000 to Rs 50,00,000, with interest rates ranging from 10.75% to 19%. However, the higher the loan amount, the more the total repayment amount will be. Hence, it is important to assess how much the travel costs you. This way, you can decide on the requirements a loan can fulfil.
- Check your secured vs unsecured credit exposure: A right mix of secured and unsecured loans is important to maintain a good credit history. Suppose you already have many active unsecured loans (loans without collateral), such as an education loan, multiple credit cards, Personal Loans etc. In that case, it is not advisable to get a travel loan. If you apply for a travel loan and get approved, you might face high interest charges and a low loan limit. So avoid falling into the debt trap by ensuring the total EMIs you pay only amount to 30% of your monthly income. A high number of unsecured loans on your credit report negatively impacts your credit score. And it may impede your chances of getting a loan in future – especially during emergencies.
- Have all the documents at hand: Getting a travel loan does not involve a lot of documentation, but some mandatory documents required will be - address proof, identity proof and bank statement. Other than a bank statement, you can use salary slips to prove your source of income. Apart from this, a passport-size photograph must be attached to the loan application. The income proof requirements may vary if you are self-employed or have yet to be employed. So keep all your documents to speed up the loan disbursement process.
- Choose your repayment term carefully: The repayment tenure on travel loans usually ranges between 12 – 60 months. But some banks may offer tenure of up to 72 months. The interest rates on these tenures will also vary based on their length. Though you might consider a longer repayment term with a lower interest rate, you will pay more. Whereas in the case of a shorter term, the EMI might be relatively higher, but the total interest payout will be less. Also, check the lender's terms and conditions about a prepayment option if you would like to pay more when you have a bit of excess cash in hand as a bonus received.
Amid your travel plans and excitement, remember to keep your account funded for any upcoming EMIs scheduled while you are away. This way, you can avoid missing EMI payment on the due date because missing an EMI impact your credit score negatively. And always remember to monitor your credit score and report regularly to ensure there's no hurdle in the loan processing. This way, you can keep a tab on your credit portfolio. Watching your credit score and ensuring you are not taking on more credit than you can responsibly manage helps you enjoy the vacation you need. And travel loans will take care of your finances while you enjoy the trip. But before you apply, use the personal Loan eligibility calculator to ensure you meet the requirements.