'Travel now, pay later': Think twice before you take loans for indulgence

Schemes are likely to have hidden costs and may leave customers with stretched finances

Loans for ‘travel now, pay later’ have become popular in recent years, fueled by marketing and easy disbursement. While such loans are appealing, they have risks that can lead to long-term financial burden. Here’s why people should think twice before taking travel loans.

 

Hidden cost

 

Travel loans are a subset of personal loans designed to cover expenses such as airfare, accommodation, visas, and other travel-related costs. While they provide immediate access to funds, they come with high interest rates, depending on the lender and loan tenure.

 

The concept of ‘travel now, pay later’ has gained popularity through platforms offering zero-cost loans or delayed payments. However, these offers often mask hidden charges and high-interest rates that kick in if repayments are delayed. When consumers upgrade their travel to luxury experiences, they may spend beyond their finances. This behavior can lead to a cycle of borrowing and repayment struggles.

 

“Using loans for non-essential expenses increases financial risk and does not contribute to long-term financial goals such as home ownership, retirement planning, or emergency preparedness. In a volatile market- with inflation creeping and job markets tightening - committing to non-essential debt is financially unwise. Always remember: a loan for need is a strategy, but a loan for want is a trap,” said Adhil Shetty, chief executive officer of Bankbazaar.com.

 

Why travel can wait

 

Travel is a form of consumption that does not generate returns like investments in education or property. It is always better to plan trips within your budget rather than relying on borrowed money. Saving over time allows you to enjoy vacations without the burden of loan repayment hanging over your head. Moreover, saving towards a goal fosters financial discipline and makes the experience more rewarding.

 

Alternatives to borrowing

 

Budget planning: Calculate your travel expenses in advance and start saving systematically.

 

Credit cards with rewards: Use credit cards offering cashback or reward points on bookings to subsidise costs.

 

Short-term investments: Invest in fixed deposits or mutual funds that can grow over time and fund your trip.

 

Cutting costs: Opt for budget-friendly destinations or off-season travel deals.