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Four Things To Consider When Applying For A Travel Loan

Unlike the previous generation, millennials today place more value in acquiring experiences rather than commodities. Did you know that a whopping 62% of Indian millennials travel between two to five times a year; from short domestic trips to longer international sojourns?

With Indians travelling much more than ever before, banks and financial institutions are now offering loans at lucrative interest rates. Travel loans are quickly emerging as the preferred credit option, being a cheaper form of credit than credit cards, having a faster disbursement turnaround time, less documentation and flexible repayment terms. If you are planning to take a travel loan, here are some points to keep in mind:

Take only what you require: Typically, a travel loan can range from INR 10,000 to INR 25,00,000 with interest rates ranging from 11% to 21%. However, the higher the loan amount, the more will be the repayment amount, Hence, it is important to assess how much of the travel can be provided for through savings and then decide on other requirements that can be fulfilled through a loan.

Check your secured vs. unsecured credit exposure: A right mix of secured and unsecured loans is important to maintain a good credit history and a high credit score. If you already have a large number of active unsecured loans (loans without collateral) such as an education loan, multiple credit cards, personal loans etc. it is not advisable to add to the burden with a travel loan.

A high number of unsecured loans on your credit report can negatively impact your credit score and may impede your chances to get a loan in future – especially during emergencies. Avoid falling into the debt trap by ensuring the total EMIs you pay only amount to 30% of your monthly income.

Have all the documents at hand: Getting a travel loan does not involve a lot of documentation but some mandatory documents required will be your address proof, identity proof, bank statement, salary slips and passport size photographs, in case of a salaried individual. If you are self-employed or not yet employed, the requirements may vary. Some lenders may also require additional details such as your income, air fare, accommodation bookings and travel plans. Check with your lender and keep all your documents at hand to expedite the loan disbursement.

Choose your repayment term carefully: Usually, the repayment tenure on travel loans ranges between 12 – 60 months after the loan is availed. The interest rates on these tenures will also vary. Though you might consider a longer repayment term with a lower interest rate, the truth is you will pay more than if you opt for a shorter one with a relatively higher interest rate. Also check the lender’s terms and conditions about a prepayment option if you would like to pay more in case you have a bit of excess cash in hand, like a bonus received.

In the midst of your travel plans and excitement, remember to keep your account funded for any upcoming EMIs scheduled for while you are away. Ensure you do not miss a single payment due date, which can in turn impact your credit score. And always remember to monitor your credit score and report regularly. This will help you keep a tab on your credit portfolio, watch for score trends and ensure you are not taking on more credit than you can responsibly manage.


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Disclaimer: The information posted on this blog (Information) is prepared by TransUnion CIBIL Limited (TU CIBIL). This Information is for generic informational purposes only and is meant for consumer education and awareness about credit scores, credit history and credit reporting. The Information posted on the blog does not constitute credit advice and the user will need to consider the same and take independent informed decisions . No part of this Information may be quoted out of context, distorted ,distributed, published and/ or reproduced in any form and manner whatsoever. Consumers are advised that the Credit Information Reports (CIRs) prepared by TU CIBIL are based on collation of information, substantially, provided by credit institutions who are members with TU CIBIL. TU CIBIL is not responsible and /or liable for errors and/or omissions caused by inaccurate or inadequate information submitted to it by credit institutions. TU CIBIL does not guarantee the adequacy or completeness of the Information and/or its suitability for any specific purpose nor is TU CIBIL responsible for any access or reliance on the Information. TU CIBIL expressly disclaims all such liability. Further, this Information is based on the data available with TU CIBIL at the time of publication and therefore may not be up-to-date.