The Buyt Desk
Planning to go on a holiday but your pocket doesn’t allow. A holiday loan may come to your rescue but you must know how it works? First thing first it is a type of unsecured personal loan. This type of personal loan is meant for seasonal expenses. Just like other personal loans, you can quickly get a holiday loan without providing collateral. You can get this loan from online lenders, credit unions, and banks with fixed monthly payments and fixed interest rates. Based on the lender, you can borrow anything between Rs 15,000 to whatever amount you wish to.
How does a holiday loan work?
Like most personal loans, holiday loans don’t need collateral if you meet the qualifications of your lender. The loan amount, interest rate, and monthly payment are affected by your income and credit rating. Some lenders enable borrowers to pre-qualify for a loan without affecting their credit score by giving some financial details.
For what purposes you can use a holiday loan
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Holiday loans can cover the bigger cost of travel. For example, paying for a place to stay, meals, and airplane tickets. You can save a lot on holiday travel using your holiday loan.
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You can use your holiday loan to buy a gift for everyone on your list when you don’t have the required money set aside. It can ease the stress that present-giving can make on your finances.
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Another use you can make of a holiday loan is to get financial assistance with entertaining expenses like groceries, catering, and decoration.
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Some lenders allow borrowers to use the money from a holiday loan for other expenses. They don’t put any limitations on the way you use the loan amount.
Holiday Loan is an ‘Easy to get Loan’
If you have a goo track record of paying back your loans on time then you may consider a holiday loan as its very easy to get –
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It doesn’t require much documentation.
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You can get your holiday loan approved and disbursed within some days based on the T&Cs (terms and conditions) of the NBFC and bank. You can even get the money within some minutes if you have got a pre-approved personal loan offer from a recognized financial institution.
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Since a holiday loan comes with no-end usage restrictions, you can use the amount to pay for all travel-related expenses.
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You don’t need to provide any collateral, guarantor, or security to borrow the amount as it comes under the category of an unsecured loan.
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You can apply for the loan procedure online right from your home.
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Timely paying the amount each month helps in creating a good credit score.
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Since the loan has a fixed interest rate, you can plan your monthly repayment with a clear format of precise dues.
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You can get convenient repayment plans throughout your loan tenure to enjoy your dream vacation.
Should you get a holiday loan?
Since there are no limitations on the end-use of the loan money, you can use it for travel-related and non-travel-related expenses. But, remember this is an unsecured loans that come with high-interest rates. Taking a holiday loan might be a good option to plan and enjoy your dream holiday without worrying about delaying your vacation or suppressing your holiday wishes due to a lack of savings. However, it is always recommended not to go on a vacation with the borrowed amount if you can’t afford to repay the money.
Based on the NBFC policy or the bank, the holiday loan has an interest rate between 12-28% per annum. Let us assume that you’re borrowing a holiday loan of Rs 5 lakhs at a 15% per annum interest rate, you would have to pay Rs 17,333 for 3 years for about 5-6 days of holiday. Alongside the expenses covered in your holiday loan, you would come across some unwanted spending.
To cover those expenses, most vacationers use their credit cards. When the credit card bill becomes high, some people change it into credit card EMIs. The stress of a high-interest loan cost and the huge credit card EMIs create a huge financial burden. To reduce the financial pressure, sometimes a person has to use their savings. In the future, when you need to borrow money for any emergency, it can be difficult to get a new loan because your holiday loan will rise the debt-to-income ratio.
