Holiday first, pay later: Offer suited only to travellers with deep pockets

No amount blocked on advance booking but such borrowing is reckless

With lockdowns easing, there are expectations of a surge in tourism, as people weary of being stuck inside their homes satisfy their desire for travel, and companies are looking to offer finance options to encourage this trend.

Thomas Cook India and SOTC Travel are first off the block with their “Holiday first, pay when you return” scheme.

How it works

Customers need to first finalise their travel package with Thomas Cook or SOTC Travel and then apply to SanKash, a non-banking finance company (NBFC), they have partnered with for financing. The amount of financing available depends on the customer’s eligibility. 

“The band for this scheme is Rs 10,000 to Rs 10 lakh, depending on the customer’s credit worthiness,” says Daniel D’souza, president and country head, leisure, SOTC Travel. The customer has to pay an upfront deposit of Rs 3,500 per person.

SanKash will ask for documents like PAN card, Aadhaar card, three months’ of bank statement, salary slip (for salaried people) or two years of income-tax return (for businessmen). It will then run checks to evaluate the customer’s eligibility.

EMIs start from the fifth of the subsequent month (after returning from the trip). No interest is charged if you repay the entire amount before that date. These loans can be taken for tenures of three, six, nine, and 12 months. The interest rate is one per cent per month, three per cent for three months, six per cent for six months, and so on.

With a travel fintech like SanKash, even borderline customers stand a chance of getting a travel loan. 

“We are even prepared to lend to first-time borrowers who don’t have a CIBIL score, or who may have defaulted a couple of times on their credit card payments. Most banks and NBFCs will not lend to such customers,” says Akash Dahiya, co-founder, SanKash.

Should you borrow?

Financial planners make a distinction between a good loan, like an education or home loan, which adds value to your life, and a bad loan, like a loan to buy a consumer product or to holiday. In these times, one needs to think twice before taking a good loan. A bad loan is an absolute no-no. “If you need a loan to fund a holiday, you are already in a terrible situation. How will you repay on return?” asks Kiran Telang, a Mumbai-based certified financial planner. She suggests saving money via a recurring deposit or a systematic investment plan in an ultra-short-term debt fund to self-finance a holiday a year later.

These schemes are suited for people who have money. “They will not have to block their own money in advance, as happens usually,” says Suresh Sadagopan, founder, Ladder7 Financial Advisories. The cost is zero if they repay before the EMI starts.

If you decide to borrow

If you decide to take a loan, check a few things. “Obtain clarity on interest rate, repayment schedule, and the total liability you will incur,” says Adhil Shetty, chief executive officer, Bankbazaar.

Shop around for credit options. “Compare the interest cost and repayment tenure offered on such a tour package with those on a personal loan or a credit card loan, which you can get on your credit score,” says Gaurav Aggarwal, senior director, unsecured loans, Paisabazaar.com.

The interest rate on personal loans begins from 8.95 per cent and goes as high as 20 per cent. An EMI on a credit card gets disbursed faster than a personal loan, but the interest charged is higher, according to Agarwal. Loans against credit card are also offered selectively to those having an excellent credit profile. Home loan borrowers may consider a top-up loan that costs marginally more than the home loan rate.