Now there is a loan for every need. Whether it is buying a house or a car, getting the latest mobile phone or planning your wedding, banks have a loan product for every need. And yes, there are travel loans too. We give you a quick lowdown on travel loans.
What is a travel loan?
As the name suggests, these are loans which can used for travel purposes. But what banks will not tell you is that these are in essence personal loans. These are mostly used by people to meet financial needs for which they are not prepared. Since they are not secured, i.e do not have a collateral guarantee, you end up paying high interest rates for it. These loans are also easily available with minimal paperwork as the bank gives you the loan and also decides the interest rate based on income. A travel loan is meant to sponsor a trip, whether in India or abroad, but it is no different than a personal loan.
What are the features of such loans?
Let us take a look at some of the salient features of a travel loan.
Eligibility: You are eligible for a travel loan if you have a regular salary from a job which is above a certain limit. If you are a business owner or a self-employed individual, banks will have minimum requirements for business stability, profit after tax and turnover. Once you are eligible, the amount of loan you can avail and the interest rate will depend upon your profile and on your credit score.
Amount: You can take a loan for as less as Rs 10,000 going up to Rs 20 or Rs 25 lakh.
Interest rates: Interest rates are charged like they are on personal loans. They could be on the range of 10.99 to 18 per cent or more depending on your profile. Interest rates also come down substantially if you are providing collateral for high value loans.
Tenure: Normally, the tenure is between 12 months to 60 months. Banks also offer loan prepayment options but there may be certain terms and conditions for the same. You can choose your EMI and tenure.
Loan application: The documents required are pretty simple. You would need an identity proof, address proof and bank statement of previous three months. Personal loans are processed very quickly, the paperwork is a mere formality and most of the paperwork is done digitally. You can apply online or through an app and the loan is approved within a few hours and the amount is disbursed in a few days. Generally a processing fee of 1-2 per cent is charged.
Repayment mode: Repayment can be done through ECS, post-dated cheques , online or through other modes.
Next we will tell you about what you need to consider before going for a travel loan.