Millennials of today like to acquire experiences by traveling places instead of indulging in buying commodities. Indian millennials usually take on domestic or international travel destinations at least three-four times in a year spending over lakhs of rupees.
With a steady increase in Indians traveling all over the globe, financial lenders in India have started offering travel loans, thereby helping travellers manage their travel-related expenses effectively.
Availing travel loans has emerged as a preferred option owing to quick disbursement, the simple application process, minimum documentation and low-interest rates.
Though taking a travel loan is hassle-free and an easy way to address emergency travel needed requirements, it is important that you ask the below questions before opting for this type of loan.
What is the loan amount you are eligible to get?
Typically, a travel loan can range from Rs. 5,000-Rs. 40,00,000 depending on the lender you are applying with and your creditworthiness.
Asking this question is important as it can help you plan your expenses travel without having to worry about finances.
On successful submission of your travel documents, the lender assesses your credit eligibility and checks your credit score based on which the loan amount and interest rate are decided.
Ideally, you should always opt for a loan amount you require as an additional amount can increase your burden and also the EMI you would have to pay each month.
Maintaining a low debt-to-income ratio is necessary to take care of all the unexpected financial hassles that may come your way.
Besides, it is also important to ensure that your monthly EMI does not exceed 50% of your salary.
You can also calculate your travel loan eligibility using an EMI calculator that helps you get an estimate of the amount you would have to pay as EMI each month.
What is the interest rate offered?
Since travel loan is an unsecured form of credit, the interest rate for this type of loan is usually higher in comparison to secured loans.
The interest rates for a personal loan for travel usually start at 10% and can go up to 36% too depending on various factors such as your age, income, employment status, existing liabilities, and other factors.
Your credit score too plays an important role as a low score attracts a high rate of interest, whereas a high credit score helps you get the loan at a low-interest rate.
To get the loan at the best interest rate, it is important that you have a minimum credit score of 650.
What is the loan tenure?
Ensure that you opt for a loan tenure that makes it easy for you to comfortably repay the EMIs.
It is important to note that a shorter tenure translates into a high-interest rate, whereas a longer tenure significantly attracts a low rate of interest.
Additionally, the tenure also impacts your EMI outflow and short tenure means that you will have to pay a high EMI each month, whereas, longer tenure implies that you will have to pay less EMI.
For instance, a loan of Rs. 3 lakhs for a period of 2 years at an interest rate of 20% would attract EMI of Rs. 15269, whereas loan of Rs. 3 lakhs for a period of 5 years at an interest rate of 20% would attract EMI of Rs. 7948.
What are the documents required?
Getting a travel loan does not require you to do a lot of documentation as you are only required to submit documents like:
- One address proof
- Identity proof
- Salary slip
- Photograph, and
- Bank statement.
The requirement of the documents may vary from lender to lender and also depend on the loan amount you wish to get.
What are the repayment options?
Opting for a travel loan with flexible repayment option makes it easy for you to repay the loan as and when you have funds at your disposal.
Lenders in India have a lock-in period, prepayment penalty and foreclosure charges that you have to bear in case if you want to repay the loan before the end of the tenure.
This is an important parameter you should look at as different lenders have different charges that you need to look at when opting for a loan.
Conclusion
Asking the above questions before opting for a personal loan for travel is a must to ensure you don’t make the wrong choice. Also, before you take on your travel expedition, control your temptation to overspend and try to keep your expenses within the budget.
With this, also don’t forget to insure your travel with a travel insurance plan that will help you take care of emergency medical expenses, trip cancellation, flight delay, personal liability cover and others.
Also, always ensure that you opt for a loan amount you can pay for as not paying the EMIs on time would hurt your credit score.
You must be logged in to post a comment Login