is it wise to take a personal loan to cover up my holiday expenses?
Everyone has a dream city where they wish to visit one day. To fulfil their dreams some do have money whereas some may fall short of it. There are various ways through which you can visit your dream destination, you can ask your friends or relatives for money, or take a personal loan. If you are a person who does not want to ask your friends or relatives for money then a personal loan can come handy. Financial institutions offer specialised personal loan for travel purpose which is called travel loan or vacation loan. Vacation loan is a loan which covers all the finances related to borrowers holidays, like flight tickets, hotel booking and other expenses are also covered. But there is one question which strikes in everyone’s mind, whether you should take a personal loan to meet your holiday expenses. Let’s understand in detail if it is a wise decision to take a personal loan to cover the holiday expenses. Also, there is also an option to make use of a personal loan emi calculator which can turnout to be very useful.
- Understand the need: Analyse the situation first before applying for a travel loan. Ask yourself if you really need the money and is it very important for you to go on a vacation right now. If yes, then you should first dig into your savings if you are a bit short on funds then you should take a personal loan if you need a large sum of money then it is advised to save some money and then plan for a vacation.
- Choose a loan according to your need: Banks do offer attractive personal loan offers to tempt the people but do not fall into a trap. Do thorough research of the loans and do compare the offers of the banks before applying for a personal loan. Find a loan which is right for you and which can be repaid easily. To compare the travel loans offered by bank you can log in to MyLoanCare. While doing a comparison consider the interest rate, processing fees, foreclosure charges, and documentation charges.
- Will you be able to repay the loan: We understand that travelling is important but it should not subside other priorities like saving for retirement or children’s education. Take a loan which you can easily repay, your EMI should not exceed 40% of your income. Increasing your EMI by more than 50% can hinder your financial goals and you may not be able to repay the loan which will severely impact your credit score and also you will face issues while getting a loan in future.
- Use the money productively: You might be taking a personal loan to surprise anyone special in your life. And it is understandable that you would want it to make it incredible but make sure that you only cover the important expenses from personal loans like flight tickets, hotel because you need to repay the loan as well. Do not take a loan that you fall into a debt trap.
- Read the documents carefully: It is important to read the terms and conditions of the document carefully to avoid the surprises later. In terms and condition form there might be few charges and fees which are not told by the banker so, it is a boring thing to do but you need to sign the documents only after you read the documents.
Why is it not a good idea?
A personal loan taken for travel purposes is an unsecured loan, meaning a borrower need not submit the collateral, but it is generally offered at a higher rate of interest. The personal loan is generally offered at 14%-23% interest rate per annum. For a few weeks, you may enjoy your holiday but you might end up spending your next few years paying the EMIs and living a stressful life.
Conclusion: Before you apply for a travel loan it is advised to look for the other options through which you can get money and you can go for a vacation because saving and waiting is better than landing yourself into financial stress.