Personal Loan for Travel: Here Are 5 Things You Should Know
Travel loans are a quick and easy way to finance your travel plans. You can get the funding instantly with minimal documentation and easy-to-meet eligibility criteria.
These features make taking a personal loan for travel appealing, both for planned and unplanned trips. These loan covers a range of expenses such as your travel, accommodation, meals, sightseeing and more. Moreover, a personal loan for travel gets you funds up to Rs 25 lakh, so you can finance a holiday or business trip for yourself and your family or colleagues both in India and overseas. Some lenders even offer lengthy loan tenor and competitive interest rates to make it more feasible.
However, while taking a travel loan, you also have the responsibility of doing proper research. This will help ensure that you make an informed and intelligent financing decision. A poorly planned holiday loan with high personal loan rates can result in a financial strain. Defaulting on your EMIs or late payments can not only burden your finances but also affect your CIBIL score. So, read on to know the 5 things you need to consider before getting a personal loan for travel.
Ensure you have a budget and borrow only what you need
While deciding your travel loan amount, make sure that you can pay it off without straining your finances. Going over your monthly budget will increase the pressure on you and affect your credit score if you aren’t able to pay EMIs on time. Use the personal loan EMI calculator to plan this. A good way to ensure that you do not go overboard is by making sure that all your EMIs, including those for your personal loan for travel, are not more than 50% of your salary or monthly income.
Take your cost of borrowing into consideration to find the best option
The key element of your cost of borrowing is the personal loan rates of interest charged by lenders. Different lenders offer different rates, up to 21% or more. A higher personal loan interest rate results in a higher cost of borrowing. It means you will have to repay a higher amount of interest. This is why it is important to compare various lenders’ personal loan rates and choose a travel loan with a nominal interest rate.
Make sure your loan tenor is optimum
Your repayment timeline also affects your travel loan EMI. A long tenor means that your EMIs will be smaller, but at the same time, your total interest dues will be high. This means that your monthly expense will be lower, but your total loan repayment amount will be higher. Based on this, you can choose a tenor that works best for you and your finances. To make the most of your personal loan, apply for a tenor that is the shortest possible while ensuring your EMIs are within your budget. Use the personal loan EMI calculator to try different combinations and select the right one.
Check the loan perks and facilities
Many lenders have value-added facilities for borrowers that make taking travel loans easier, quicker or more affordable. These may include pre-approved offers that make borrowing simpler and faster, offering funds for travel in just a few clicks. You may also use an instant loan app offered by lenders to apply on the go right from your smartphone. Some lenders offer funds in just a day so you can finance urgent plans with ease. Others have no prepayment charges so that you can become debt-free faster. This makes it important to compare lenders and their offerings to get the best deal.
Consider your CIBIL score and improve it if needed
A good credit history and a high CIBIL score are key to getting competitive interest rate for personal loan. This is because lenders trust borrowers who have repaid loans on time in the past and have experience with both secured and unsecured credit. Since a personal loan for travel is unsecured, which means you don’t have to use an asset as security, lenders rely on your credit score to approve your loan application. If your CIBIL score is 750 and above, you have the power to negotiate for lower personal loan rates of interest and get a higher loan amount. If not, you can work towards boosting your score by paying off existing debts and decreasing your credit utilization ratio.