Travel Loan Interest Rates
Very few lenders offer unsecured travel loans as a separate loan category. Lenders offering travel loans usually charge the same interest rates as their regular personal loans. Moreover, the proceeds of regular personal loans can be used for financing travel-related expenditures. Hence, prospective applicants can use the personal loan interest rates offered by various lenders for availing travel loans.
Factors to Consider When Availing Personal Loan for Vacation
Before taking a personal loan for travel, there are a few things you should keep in mind.
- Interest rate
The interest rates for personal loans for travel usually start from 10.49% p.a. and some lenders may offer lower interest rates to their existing customers. The final rates offered to applicants can vary from one lender to another depending on their creditworthiness. Therefore, make sure to always compare the personal loan interest rates offered by different lenders to find the best loan offer for your travel plans.
- Repayment tenure
Most lenders offer personal loans for minimum tenures of 6 months and maximum tenures of 5 years. However, some lenders offer personal loans for longer tenures. For example, the minimum and maximum tenure for SBI Personal Loan are 6 months and 6 years respectively. Similarly, the maximum tenure for PNB Personal Loan and Indian Bank Personal Loan is 7 years. Incase of Tata Capital Personal Loan, the maximum loan tenure can go up to 6 years.
Longer repayment tenure means lower monthly payments but this way, you will end up paying more interest cost over the course of your loan. To avoid this, make sure to choose the repayment tenure that fits into your budget.
- EMI affordability
Lenders usually sanction personal loans to applicants whose total EMI obligations, including that of the proposed personal loan, does not exceed 50-60% of their total income. Therefore, if you are planning to avail travel loan, you can consider using Paisabazaar’s Personal Loan EMI Calculator to find out the optimum EMIs and loan tenures for your personal loan based on your repayment capacity to ensure your total EMIs stays within 50% of your net monthly income.
- Processing fees
The processing charges for personal loans can go up to 4% of the loan amount, depending on the lender. However, some lenders have capped the processing fee, regardless of the loan amount. Many lenders also waive off the personal loan processing fee during festive seasons. While the processing fee is a one-time charge, it increases the overall cost of availing loan. Thus, those planning to avail personal loans should compare the processing fees charged by different lenders, even if they are offered a personal loan at a low interest rate.
- Prepayment charges
You should also know that the RBI has barred lenders from levying a prepayment fee on personal loans lent on floating interest rates. However, there is no such restriction on personal loans availed on fixed interest rates. Most lenders charge a prepayment penalty of up to 5% on the outstanding principal amount. At the same time, many lenders also restrict personal loan borrowers from making prepayments until the repayment of some pre-decided EMIs. Thus, those planning to avail personal loans while keeping the options of prepayment open, should compare the prepayment charges of various lenders and then, choose the one that charges nil or lower prepayment charges with least restrictions.
- Credit score
Your credit score plays a crucial role in determining the interest rate you will get on your personal loan. A higher credit score usually means a lower interest rate. So, make sure to maintain your credit score of at least 760 or more and take steps to improve it, if necessary.
Pros of Taking a Personal Loan for Travel/Vacation
- Quick disbursal
Lenders usually disburse the personal loan amount within 2 to 4 days. However, lenders using an end to end digital onboarding process for their personal loan applicants have started offering digital personal loans with quicker disbursement than personal loans offered through offline mediums. Many lenders also offer pre-approved personal loans to their existing customers with good credit profiles. These loans have instant or near instant disbursals.
- Collateral-free
Personal loans are unsecured in nature, which means borrowers do not have to pledge any collateral/security to avail these loans.
- No-end usage restrictions
Personal loans come with no-end usage restrictions. This means, you can use your personal loan or holiday loan proceeds to pay for all or any type of travel-related expenses including visa fees, flight tickets, accommodation, local commute expenses, taxi fares, sightseeing tickets, shopping, food, etc.
- Lower interest rates than credit cards
Personal loan interest rates range between 10.49% to 24% p.a. Credit card interest rates, on the other hand, usually start from 40% p.a. Even the interest rates of credit card EMI conversion and loan against credit are usually higher than the personal loan interest rates offered to the same individual. Thus, availing personal loans would be a more affordable option for travel or holiday financing compared to credit cards.
Cons of Taking Personal Loan for Travel
Higher interest rate than secured loan options
Even though personal loans offer lower interest rates than credit cards, the personal or holiday loan interest rates are usually higher than secured loans options like gold loan, loan against property, loan against securities, etc. This is because the availability of collateral in secured loans reduces the credit risk for the lender, which in turn passes the benefit to the borrowers in the form of lower interest rates.
Some of the secured loan options also beat other personal loans features because of their longer tenure, bigger loan amount and higher EMI affordability. Because these loans are secured, the impact of credit score during the loan review process is also reduced, which further increases the chances of availing loans for borrowers with low credit scores.
Prepayment charges & foreclosure restrictions
Along with the interest component, personal loans also come with prepayment charges and foreclosure restrictions. While the RBI has barred lenders from charging prepayment fees on floating rate personal loans, there is no such restriction on fixed rate personal loans. Most lenders charge up to 5% of the outstanding principal amount of personal loan, which can increase the overall cost of the loan. Many lenders also restrict personal loan borrowers from making part-prepayment or foreclosure until the payments of some predetermined EMIs.
Understanding the Process of Getting a Travel Loan
You can avail Personal Loan for Travel through the official website of the lenders or by visiting their branches. Alternatively, you can also visit online financial marketplaces like Paisabazaar.com to compare the interest rates and other features of travel/personal loans offered by various lenders based on your credit profile.
FAQs on Travel Loan
What is a Travel Loan?
Travel loan is a sub-type of personal loan offered to applicants to finance their various travel/vacation related expenses.
How can I avail Personal Loan for Travel?
You can avail Personal Loan for Travel by applying for personal loans through the official websites of banks and NBFCs or by visiting bank branches. You should also visit online financial marketplaces like Paisabazaar.com to compare the interest rates and other features of travel loans offered by various lenders.
What is the interest rate for Personal Loan for Travel?
Prospective applicants can avail personal loan for travel/holiday related expenses at interest rates starting from 10.50% p.a. onwards depending on their credit profile and the lender opted for. However, some public sector banks may offer lower interest rates on personal loans availed for financing travel/vacations.
What are the documents required for availing a Travel Loan?
The applicants need to submit their ID Proof (Aadhar card, PAN card, Voter ID, Passport), address proof (Aadhar card, PAN card, Voter ID, Passport, Utility bills), bank statement for past 3 months and latest salary slips while applying for Travel Loan. However, the documents required for availing Travel Loans may vary across lenders.
Can I use my travel loan proceeds to finance overseas travel?
Prospective travel loan applicants can use their travel loan proceeds to finance various expenses related overseas holidays/travels, such as flight tickets, hotel bookings, local area tours, etc.
What maximum loan amount can I avail for a Travel Loan?
The maximum loan amount eligibility for your travel loans or personal loan would depend on your repayment capacity. Lenders usually sanction personal/travel loans to individuals whose existing EMIs, including that of the proposed personal/travel loan, does not exceed 50-55% of their monthly income.