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Travel loan works out to be cheaper than credit card

NEW DELHI:Travel, for many Indians, is increasingly not so much an option but a necessary expense as leisure travel is now a part of lifestyle.

“Roughly speaking a person may spend approximately 5 -8% of their annual income for travel and leisure purpose,” says V George Antony, MD, UAE Exchange India. This is expected to increase over time as earning power increases over time.
The overseas expenditure by Indians is poised to touch the Rs 1.1 lakh crore mark by 2017. The number of people travelling abroad went up from 1.3 crore in 2010 to 1.9 crore in 2015, according to industry estimates.

More Indians are holidaying abroad than before due to a combination of reasons including increase in disposable incomes, ease of access to information about foreign countries, introduction of budget airlines, rise of branded budget accommodation and large number of countries offering visa on arrival.
Leisure trips are no longer seen as an expense but are treated as part of lifestyle. Travel helps to rejuvenate people who get a welcome break from their ultra-busy modern lifestyles. “Children demand vacations with parents because of nuclear family concept, peer group influence and apartment living lifestyle. Travel is the time taken out to spend with family and friends. So travel for leisure has now become part of lifestyle,” says Antony.
Most of the travellers belong to the age group of between 18 and 35 years. These young and agile travellers prefer to holiday in exotic destinations. “Earlier people would travel for one big holiday overseas and a domestic holiday. The trend is changing, people go for multiple holidays and that includes exotic destinations such as Seychelles, Vietnam and Japan,” says Karan Anand, head, relationships, Cox & Kings.
Increasingly, travel is a big part of the annual budget. “People plan in advance and keep a portion of money aside or take an EMI for a holiday,” says Anand.
The present day generation believes in living now and don’t mind paying for it in EMIs later. “Travel as a category of household spend is increasing, and several people are now availing personal loans for travel,” says Ambuj Chandna, senior EVP, Kotak Mahindra Bank.
The trend of taking loans for travel leisure is in infant stage in India, compared to developed countries. “It will increase as the country’s economy improves,” says Antony.
Before you opt for a travel loan, do check out the rates offered by various banks, before you sign on the dotted line. The interest rates could vary from 11.5% to as high as 24%. “When you take a travel loan from a scheduled bank the interest charges are the same as a personal loan and so it is high,” says Anand.
Many individuals use their credit cards rather than opting for a travel loan, but remember the travel loan works out cheaper than a credit card.
P V Subramanyam, chartered accountant and financial trainer is not in favour of a loan for a vacation. “You cannot borrow to spend for then you are living beyond your means,” he cautions.
If you are planning for your travel for next year, then a bit of advance planning will help you save a lot. You could use the Recurring Deposit products of banks to structure your savings for a future travel plan. “The holiday RD proposition enables customers to pre-book a package from our partner travel agencies, and as per the estimated cost, save for it,” says Chandna.
Subramanyam suggests that individuals or families should create an entertainment budget. “All entertainment including hobbies, travels, parties, eating out should be limited to that entertainment budget,” says Subramanyam.
“Also, the amount set aside for the entertainment budget should be less than the amount set aside for retirement,” says Subramanyam.
This discipline and financial prudence is very important to ensure that the present day travel is not at the cost of a good life in the future.

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