Ask Yourself These Questions If You Are Eagerly Planning To Travel With Personal loan
In today’s era of social media, people have begun opting for exotic destinations to satisfy their wanderlust. From trekking adventures in Switzerland to peaceful stays in Thailand resorts, their bucket lists overflow with new holiday spots and uplifts during this Covid-19 pandemic.
Besides, funding a world trip is not as simple as opting for a destination and notably during this 2nd wave of coronavirus across India when people have got hit financially harder than before. Consequently, many travel plans remain unfulfilled due to the shortage of funds.
But regardless of anything, life should not be stopped, those who understand this fact know that it has to be enjoyed since it is uncertain. One of uncertainty, we all our going through since last one and half years. Well, keeping the same in our view, this particular blog is for you.
So, one of the viable options for those that do not have an adequate amount of savings for that exotic vacation is a personal loan for travelling. It enables you to borrow from the bank and the better part is that the financial institution does not monitor how you use the funds.
It definitely stands out as your best companion particularly during this medical and financial crisis to help you amazingly for funding your vacation, if you handle it responsibly.
But before you apply for a personal loan for a vacation, you must ensure, you weigh the benefits and drawbacks and make a choice that most ideally fits your current financial position. Below we have listed some of the vital questions that you must ask yourself before coming up with a certain personal loan offer for travelling.
Do I actually need a personal loan to fund my travelling?
This should definitely be the leading question in your mind while making travelling plans, you must be aware of your capability of handling a personal loan which counts on your current financial situation and the potential growth you expect.
You must also consider evaluating your vacation budget to seek out how reasonable it is in your current financial situation; whether you'll be able to afford the value of an exotic location, flight tickets, a five-star hotel and the adventure sports you muse to try.
Once you get your holiday budget reasonable, then you are required to stringently check your savings and emergency funds. You should not apply for a personal loan for vacation if you contemplate that your additional savings will be enough for the value of your holiday expenses.
Nevertheless, do not wear out all of your savings for a vacation. So, a personal loan is a sensible choice as long as you do not have enough savings but your savings can help you manage additional expenditures.
How much additional cash will I need to keep aside to manage it?
This is another crucial question that you should ask yourself. This depends upon the interest rate at which you will get the personal loan. Prior to finalizing your moneylender, you must seek a lower rate of interest alongside better terms and conditions.
As vacation is planned beforehand, you must take a while to build a good credit score which can support you negotiate a quite better rate of interest. Also, perceive the EMI stress which can be added to your monthly expenses.
For example, if you are already paying EMIs towards multiple credit cards, you must establish an idea about the way to fit another EMI into it.
How is the interest computed on a personal loan?
Interest on personal loans is computed by either of the two ways - reducing balance method and flat rate method. When calculating as per the flat rate method, you will need to pay a fixed amount as interest on a monthly basis. While, if you choose the reducing balance method, the interest will be computed on the remaining principal amount at the end of every cycle.
Moneylenders who use the flat rate method typically offer loans at a much lower interest rate as the effective rate of interest is far higher therein case. You should ask your moneylender about the method of interest computation to form your vacation less of financial stress.
What are the additional charges that I will need to pay?
Interest is not the sole cost associated with personal loans; other charges such as processing fee and foreclosure charges, etc. also play a significant role. Contrast the additional charges of different lenders with the help of a personal loan EMI calculator and opt for the one that renders a cost-effective rate of interest alongside low additional charges.
For example, a lender could offer you a lower rate of interest but the terms could also be stricter and if you delay in paying an EMI, it will not take long to push you into the debt well.
Conversely, there might be a lender that can just take a 1% higher rate of interest but does not levy any penalty for prepayment of the loan. Thus, it would stand out to be better to travel with the latter last-mentioned.
Can I prepay the loan prior to the maturity date?
Foreclosure charges should even be considered when taking a personal loan. This is often charged as a percentage of the whole remaining amount that you simply pay prior to maturity.
Potentially, if you get a good raise or make a gigantic gain from your investments, you can consider partly paying towards your personal loan or entirely foreclose it beforehand. But if pre-payment comes with huge charges, it might not stand out in your favour.
Is it better to choose a secured loan than a personal loan for vacation?
Being a borrower, it always remains within your interest to consider the alternatives as it is quite easy to avail of a personal loan when no option falls in your interest, it comes with an interest cost that's above most of the loan types. So, if you've got an asset to promise as collateral, you must give preference to secured loans as you can get it at a lower rate of interest.
Most of the Indian households possess gold in the form of jewellery which is accepted by the moneylenders. Therefore, a gold loan is also a good alternative to a personal loan as the interest cost is lower and the processing of a gold loan is additionally quicker.
Another alternative to personal loans is a loan against fixed deposits. If you already hold an FD in your bank and want to get quick access to funds, you can avail of a loan against your deposits.
The Loan to value (LTV) in this event may range between 75% to 85% and the rate of interest is typically 1%-2% higher than what the bank is extending you as interest on a fixed deposit. Top up home equity credit or loan against insurance policies can also be considered as alternatives to personal loans as they offer you a lower rate of interest.
The Bottom Line
The above-stated questions are coherent and highly significant asking yourself if you've already taken the decision to travel to your dream vacation by taking a loan. What experts recommend is that loans should never be taken into usage for meeting voluntary expenses.
Taking an outlandish vacation will rile your bucket list but do you contemplate it is worth paying EMIs for the next 2-3 years? The solution to this question will differ from person to person provided that their economic situation and life objectives. Hence, set your priorities then anticipate taking a personal loan for vacation.
Moreover, if you are seeking to travel across India and have stuck in confusion with the best travelling destination in India, this special blog will definitely help you on the same.