1 in 5 take personal loans for vacations, non-metros drive demand: Survey

 Indians, especially from non-metro cities, have been availing personal loanas for home renovation and to meet vacation-related expenses, according to the findings of a survey conducted by Paisabazaar.

While personal loans have been traditionally availed for need-based expenses such as medical emergency, higher education of children, at least 21% took a  personal loan for travel in the January- June 2023 period, as per the findings. 

Of the respondents who took a personal loan for travel in the January-March period of 2023, , 16% took it for vacation purposes. However, in the April-June quarter,  27% of the respondents avaialed the loan for  vacation-related expenses.

Paisabazaar saw a significant rise in loans for foreign vacations between April and June, as compared to the previous  quarter. In the last 6 months, of all respondents who had taken a personal loan for holiday, 73% said they took the loan for domestic vacations, while 27% used the loan for travelling abroad.

The holiday loan seekers were followed by borrowers refinancing other loans, including card outstanding and those taking loans for medical bills. The remaining 29 per cent was to cover wedding, education or business expenses.

Driven by personal loan demand, the credit offtake from banks rose by 16.3 per cent year-on-year (y-o-y) while the deposits grew slower at 10.2 per cent during the last quarter of FY23, Credit Rating agency CARE Ratings said in a report.

A large proportion of demand for holiday loans came from outside the top metros. 68% of respondents who took a holiday loan through Paisabazaar between January 1, 2023 and June 30, 2023, were from non-metro cities. These 68% of respondents came from 97 non-metro cities.

The maximum number of respondents residing in non-metro cities who took a personal loan for vacation travel came from Jodhpur, Patna, Kanpur, Agra, Surat, Patiala etc.

Among the metro residents who took a holiday loan, 77% used it for a domestic vacation while 23% availed it for foreign travel. Maximum number of holiday loan takers from metro cities came from Mumbai (25%), followed by Bengaluru (22%) and Delhi NCR (20%).

Holiday loans are largely being driven by salaried consumers, revealed the survey. 74% of the respondents who took a holiday loan between January and June 2023 were salaried, while only 26% were self-employed professionals (Doctors, Lawyers, CAs) or business owners.

"Every year, I use the annual bonus I receive from my company in March for travelling with friends or family. This time, I planned a vacation in Vietnam with my parents. While the annual bonus and the money I had saved seemed enough, I took a personal loan just for some cushion," said respondent Manas Das, 29 who is an  IT Professional in Kolkata.

The months of January and June, when schools and colleges in most parts of the country are on a break, saw maximum demand for holiday loans during the first six months of calendar year 2023.

 Of those who took a holiday loan in the last 6 months, the maximum percentage came in June (26%), followed by January (23%).

March had the smallest proportion with only 9% of the holiday loans coming in the last month of FY 23.

During January, around 75% of the holiday loans were for domestic vacation and 25% for a foreign holiday. In June, the holiday loans for foreign travels were at 36%, registering a considerable rise, primarily due to the long summer break in schools and colleges.

Dubai and Goa were the most popular destinations among the respondents who said they financed their vacation through a personal loan.

Among the respondents who took holiday loans for domestic travel, 23% chose Goa as their preferred holiday destination. After Goa, the most popular destination was Himachal Pradesh (10%), followed by Uttarakhand (9%) and Kashmir (9%).