Watching movies with a backdrop of beautiful scenery or watching travel vlogs can make anyone feel the itch to go somewhere. If you have reserved money to travel then you do not need credit but if you couldn’t save money due to some other obligations then a travel loan is something you can avail of. Numerous credible lenders on the market now provide travel loans to make sure that money is not a hindrance to having the perfect vacation. And, if you have a good Equifax credit score then your chances of getting a travel loan at a good interest rate are pretty high.
What are travel loans?
Travel loans are essentially personal loans without collateral. Under a travel loan, you get the option to decide on a loan amount with a predetermined interest rate and periodic installments of that amount of money. These are unsecured loans that are only approved based on the borrower’s creditworthiness, Equifax credit score, and their repayment capacity. It is possible to get a low-interest-rate travel loan if the applicant has an exceptional credit rating.
How much does your travel loan cost?
You must first develop a thorough travel budget before deciding how much of a travel loan to take. Follow these steps to achieve that:
Do some research before you go: To obtain a sense of the locations you want to visit, read travel guides or browse travel websites. Make a list of the activities you want to do there and their estimated prices.
Create a travel budget: Determine your per-day and overall trip costs based on your study (including meals, sightseeing tickets, transportation, visa fees and lodging). Alternatively, you might approach a travel agent and get a quote for a package or a specially designed-tour. To determine the overall cost of the trip, add 20–30% to the projected budget.
Check the amount of money you have on hand: How much can you raise on your own? Check your bank accounts and take into account anticipated receipts like an annual bonus or investment income that are due.
Features of Travel Loan
- For personal loans and other unsecured loans, the bank frequently demands an Equifax credit score of at least 750. In general, guarantors are not needed to prolong loans; however, if the travel loan is for more than Rs. 2 Lakh, the bank may need a guarantor or collateral.
- The loan amount is disbursed in accordance with the requirements. The borrower can request a cost estimate for the entire trip and submit an application in accordance with that information. Numerous companies that offer vacation packages typically have relationships with various banks. The applicant can submit their travel loan application to one of these banks which will simply process the payout and documentation.
- However, if there are agreements with travel package vendors, considerable due diligence is not required and the bank may either offer the loan for 0% processing cost or at a reduced rate.
- The payback period may last anywhere between 12 and 60 months.
- Many banks might not distinguish between domestic and foreign travel loans. The applicant’s income and Equifax credit score, and history may be used to calculate the loan amount. The borrowed funds in this case could be used for both domestic and international travel.
- Each bank may have its qualifying standards, requirements for an Equifax credit score and guidelines for unsecured loans, including travel loans. The applicant must completely understand all the requisite terms and conditions and thereafter submit a suitable application in accordance with it.
- A typical travel loan can be obtained for between 10,000 to 25,00,000 INR with interest rates between 11% and 21%. It is crucial to determine how much of the travel can be covered by savings before deciding which additional criteria may be satisfied with a loan because the bigger the loan amount, the higher the repayment amount will be.
Why Good credit score matter for travel loans?
- To qualify for more affordable loans, you must have a decent CRIF credit score. According to experts, a borrower’s credit score is an important part of his or her financial profile and not merely a reflection of their trustworthiness.
- A borrower’s credit score or CRIF credit score reveals whether or not they have a good credit history. This in turn enables lenders to choose whether and at what interest rate to offer loans to such borrowers.
- Obtaining loans is simple for those with strong credit scores or CRIF credit score. A person with a low credit score, however, finds it challenging to obtain a travel loan. Even if such a person is approved for a loan, the interest rate will often be higher for him or her than for those with good credit.
- Every person should maintain a positive credit history and credit score. Having said that, a borrower’s credit score is impacted by a variety of circumstances. Spending too much money is one of the things that can lower someone’s credit score. Therefore, one should refrain from overspending while using a credit card while travelling.
- Overspending and high utilization of the credit limit, according to experts, may temporarily affect a person’s credit score.
Here are two important ways to safeguard your credit:
- Use reminders to avoid late payments: It might be challenging to keep up with payments when you are travelling. Even though a late fee is annoying, paying more than 30 days past due will seriously damage your CRIF credit score because payment history has the biggest impact on your score. Use email alerts to remind you of due dates and notify you when your credit usage level is about to be reached.
- Double-check it for fraud: It’s a good idea to check your credit card accounts online when travelling to look for charges you didn’t make. Pay close attention to any transactions you make online. The sooner an issue is identified, the sooner the damage to your card can be repaired.
It is wise for financial management to budget for unexpected costs that may arise while travelling. When travelling, costs are occasionally unavoidable, therefore having a credit card handy may be very beneficial in providing that safety net. However, one must consider their ability to pay off credit card debt on time because carrying over sums might result in prohibitive fees of 2.5% to 4% per month.