Getting Personal Loan For a Trip Is a Good Idea Or Not?
The holiday season is here. It’s time to splurge on the festivities. Be with friends and family. It’s time to plan for the trips that you missed out on for the last two years.
Holidays and trips are great. But it is also a little heavy on the pocket. Or you might be just short of the budget for the big trip that you have been planning. When you have planned and anticipated so much, cancelling is certainly not your preference. A personal loan for a holiday trip might just help you.
What is a personal loan for a holiday trip?
A personal loan for a holiday trip is a loan that you can avail to pay for your travel expenses. Many financial institutions offer personal loans to cover your travel expenses. Not all financial institutions advertise a personal loan as a loan for a holiday, but most personal loans do pay for many travel-related expenses like transportation expenses, hostel fare, car rentals, etc.
The loan amount that you can avail of differs from organisation to organization. However, these loans for holiday trips are unsecured. They may have higher interest rates.
Why opt for a personal loan for a holiday trip?
Whether you are a travel buff or a one-time tripper, finances can sometimes place your plans on hold. A personal loan for a holiday trip helps you pay for your travel expenses. You have to remember that, with the added interest, the overall cost of the trip will be higher than what you would incur without a loan for a holiday trip.
On the other hand, you cannot delay that business trip that is around the corner or halt emergency travel. On such an occasion, a personal loan for a holiday trip is the right way to go. Taking out a loan for a once-in-a-lifetime opportunity may not be a big deal for some. The memories that you will make are much more precious than the extra amount spent.
Some obvious benefits of taking out a personal loan for travel are:
- You will spare your savings from spending on travel. You will also get the option to pay back the loan in a small monthly fixed amount.
- If you are faced with unexpected travel and a cash shortage, a personal loan for a holiday trip can come to the rescue.
- To minimise your burden of interest, you can check for discounts whose rebate rates are lower than the interest rate of your loan for a holiday trip.
- Loan for a holiday trip can also prove cheaper than using credit cards. Many loan options have interest rates that are lower than the interest on your credit card spending.
Should I be concerned while applying for a personal loan for a holiday trip?
The basic idea of a loan is that it should help you grow your asset or pay your dues, like credit card expenses, hospital charges, weddings, home renovations, etc. However, due to their high interest rates, personal loans are the least popular of all kinds of loans. And taking a personal loan for a holiday trip is the least favourable of all options.
You take a loan for your holiday trip of one week or 10 days. The interest that you will be charged will increase the expenses many folds than the actual cost of the trip. The result is that for that short trip, you will keep paying for the next two or three years.
Travelling comes with many unforeseen expenses, no matter how well you plan. You have already planned your trip by taking a loan. You will pay interest on this. Then there are these additional expenses. You will use your savings or your credit card to pay for these. In such a scenario, your expenses are mounting, and by the end of the trip, you will be burdened with much more than was originally expected.
Personal loans can also negatively affect your credit score. If you require another loan, say a home loan, in the period your personal loan is running, it is highly likely that your home loan will be rejected due to a negative credit score. Thus, you will miss out on the opportunity to create an asset.
You plan a vacation to relieve stress and enjoy some peaceful days. Now, imagine getting home with a load of money with interest to be paid back. It is stressful. This is just the opposite of what you wanted from your holiday. So instead of returning lighter, you are returning heavier.
What should I do?
After going through all the positives and negatives of a personal loan for a holiday trip, you have decided to finally opt for one. Here, you need to keep a few things in mind.
- Be very stringent with your budget. Set a strict limit on your spending and do all it takes not to go over the board. At the same time, keep a percentage of the loan aside to use for any unplanned expenses that may show up. Staying within your budget will keep your mind lighter and your pocket heavier.
- Check your repayment capacity before you borrow. Never take a loan that you will not be able to repay on time. It will negatively impact your credit score. It will also overburden your monthly expenses.
- Try to pay your loan for the holiday trip before the final payment is due. You will end up saving a lot on the interest that you were supposed to pay. Some banks may charge a re-payment amount, but rest assured that it will still be lower than all the interest that you will pay.
- Planning is key when applying for a personal loan for a holiday trip. Check for the interest rates and the number of EMIs that you will be paying. Compare different options. Different financial institutions have different payment options. Choose the option that is best suited to you and provides an option for early repayment without a heavy penalty.
Personal loans are great for meeting any unseen expenses. If an unexpected travel plan comes up and you are short on cash, a personal loan for travel can bail you out of the situation. However, before you use one, get a proper fact check. Check out Piramal Finance for more information.