Year-end holidays: Avoid expensive loans, plan a budget-friendly trip

Read through terms and conditions of loans carefully, paying attention to default clauses, penalty charges, and any hidden fees.

Many Indians are planning their year-end vacations to meet family and friends, explore new places and create memories. It is crucial to plan the finances for such vacations and avoid falling into a debt trap in the new year.

 

“Travel loans are usually structured as personal loans, typically starting at around 10.75 per cent per annum, though some lenders may offer lower rates to existing customers. A good practice is to compare rates from different financial institutions and leverage your credit score for better terms,” said Rishabh Goel, co-founder and chief executive officer (CEO) of Credgenics, which uses technology for debt collection and resolution.

 

  Kaushik Chatterjee, founder and CEO of personal loan app Lendingplate, recommended tips to ensure that your travel plans do not lead to financial woes. His tips:

 

Start by setting a realistic budget that covers all essential expenses like travel, accommodation, meals, and activities. Calculating these costs upfront will help you determine exactly how much you need to borrow. This approach not only prevents over-borrowing but also ensures that you’re using your loan for necessary expenses, keeping your spending under control.

 

Look for loans that offer shorter repayment terms and competitive terms and offerings.

 

Don’t max out your credit or loan limits for a single trip. Maintaining a balanced credit utilisation rate will protect your credit score for future needs.

 

Start your year with a repayment plan. By setting aside a small amount monthly, you can manage your EMI comfortably and enjoy your travel memories without financial stress.

 

“Read through terms and conditions of loans carefully, paying particular attention to default clauses, penalty charges, and any hidden fees. Understanding these details upfront can help you avoid unexpected costs if you face delays in repayment or decide to repay the loan,” said Goel.