Things to Keep in Mind while taking Personal Loan for Vacation

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It is said that the best holidays are unplanned, but these bring with them the burden of hefty expenses. It leaves many of the globetrotters perplexed thinking about the funds. You would either need to be rich or break your savings deposits to make your vacation extravagant. Well, the midway out is that different banks in India and Fintech companies offer personal which lets you plan your holiday the way you like. There is another possibility of you using your credit card for the same, but when it comes to the interest rate, then personal loan comes at a lower price. In India, personal loan starts off form 11% p.a.

Why is personal loan good for planning holidays?

Many banks offer personal loans. These loans are unsecured and are relatively easy to avail. To make them work more in your favor, you need to do a comparative analysis of the various banks and financial companies who offer this loan. Since the interest rate for the same may vary, making a comparison will get you a better deal. When we talk about personal loan, here are some key features which makes it so popular:

  • They are easy to avail
  • An unsecured loan, so no need to keep anything as collateral
  • One can use the personal loan amount for vacationing, meeting the medical expenses, paying bills, education, marriage, etc.
  • The loan application process is easy

All these factors make personal loan become a popular choice when there is a need to meet emergency expenses. So, if you too are planning to go on a lavish vacation, a personal loan can come handy to you. However, you must know that these loans are unsecured and come at a higher interest rate, so if you are planning to apply for one, make sure that you do a comparative analysis of the same. For example, HDFC personal loan interest rate varies between 15.50% to 20.00%, and SBI personal loan interest rate comes at 11.00% to 16.60 %. Similar variation is seen in the personal loan offered by different banks.

Note: An important point that you should not miss is your credit score. For any loan application and approval, you need to have a good repayment history and CIBIL score, which helps the bank in assessing your financial health and creditworthiness. So, make sure that you check your credit history before applying for a loan.

What should you know before taking a personal loan for vacation?

As mentioned above, this loan comes at a higher interest rate and lower repayment period. Hence you must only apply for this loan when required. But, if you are planning a holiday and want a good amount of money, then this loan will come as help. You must know about the following points before applying for a personal loan:

  1.   Take loan only when you can repay– While personal loan might sound like a lucrative deal, but as mentioned above, it comes at a higher interest rate. So, you must have a repayment capacity. Assess whether you can repay the loan or not, late payment or delayed repayment will impact your credit score, thereby reducing your probability of availing the loan in future.
  2.   Do interest rate comparison- We have mentioned before that interest rate of a personal loan varies from bank to bank, so if you have to narrow down your options, doing a comparative analysis of interest rate is the best move that you can make. For example, HDFC personal loan starts at 11.25 %, which is low as compared to other banks, so you can opt for this bank. If you find another bank offering a better rate, you must settle down with that.
  3.   Flexible repayment– Another factor that you need to consider while availing the personal loan is flexible repayment options. Also, check the part prepayment and prepayment features. Most of the banks have prepayment charges, so make sure that you don’t forget to compare them.
  4.   Stick to the budget- It’s a holiday, and many people tend to overspend, but if you have taken a personal loan or are planning to take one, then you must ensure sticking to the budget, going over it can make you spend more, thus burdening you with financial stress.
  5.   Travel insurance- You must also be ready for a contingency like loss of luggage, accidents, hospitalization, etc. To ensure that you don’t have to face any hassle managing these contingencies, its always good to take travel insurance. Most of the banks have the provision or even the travel companies offering the same, so don’t forget to take them if you are traveling.
  6.   Check Your CIBIL Score- The approval of a personal loan or any other loan depends on CIBIL score. The banks assess your financial credibility using this score. A good credit score always enhances the probability of loan approval, while the ones with a lower score will not get the loan. So, while applying for the same, you need to check the credit score and credit report. A copy of the same has to be submitted in the bank.
  7.   Don’t get lured by additional offers- Many times, banks offering a personal loan will also offer to add on features like accident insurance, etc. They might say that there will be no extra charges for the same, but there is a hidden cost, which you need to ask them and read the documents properly. Once you have gone through it only then go ahead and apply for the loan. Otherwise, you will be burdened by extra charges.
  8.   Read between the lines- Loans can be tricky, and since its repayment will impact your credit score, you must do a thorough reading for the papers before applying. Don’t get lured by the baffling advertisements.

The bottom line– Personal loans are an excellent choice for planning a vacation, and with a bit of carefulness and keeping the pointers mentioned above in your radar, you will be able to make the best of it.