Travel loans and travel deposits: Things you need to know

Travel loans and travel deposits: Things you need to know

The high-profile wedding of leading Bollywood stars Deepika Padukone and Ranveer Singh in Italy has focussed attention on the tourism destinations in the European country. Fans of the actors are now searching for destinations in Italy where they can head to during their next holiday. The youth are now particular about travelling to an exotic place at least once a year along with friends or solo. Several banks and financial firms, recognising this trend, are offering loans and schemes to fund the trips.

Limited paperwork is involved to grant travel loans, that cover urgent business trips as well as elaborately planned leisure journeys .

Raising the big amounts needed for travelling in connection with urgent business meetings or for tourism is difficult for middle-income families. During such occasions, the 'travel loan' issued by banks comes in handy. The loan can be availed without even visiting the bank with the help of the Internet.

Travel loan essentially is a personal loan. The interest rates and other conditions are the same but nationalised banks generally keep away from offering this facility. Meanwhile, the new generation banks and private financial firms are announcing more travel loans.

Eligible categories

Travel loans are available for trips in India as well as abroad. The expenses for travel, stay, food, tickets at tourist spots and visa fees can be included in the loan amount.

Senior citizens enjoy a discount in the interest rates. The period of loan repayment extends between 12 months and five years.

Travel loans and travel deposits: Things you need to know

Budget preparation

Before applying for a travel loan, a detailed study has to be carried out about the budget. Other details like period of stay also need to be finalised.

Copies of identification documents, salary slip, bank statement and PAN card are to be submitted to the bank. The amount will be transferred to the account of the travel agency in case the trip is arranged by it. People who plan and carry out trips on their own will get the money in their accounts.

Recurring travel deposit

For people who plan their trip at least a year earlier, a recurring deposit is more beneficial than a travel loan. Some banks also offer online recurring schemes exclusively for travel purposes.

The scheme is usually arranged along with a travel agency. People can select a tour plan of the travel agency and apply for the scheme with the bank. The amount needs to be deposited in equal instalments only. When the term of the scheme is completed, the total amount is transferred to the account of the travel agency.

Travel loan vs Travel deposit scheme

Travel loans and travel deposits: Things you need to know

A comparison between travel loan and recurring deposit related to travel will give people a clearer picture.

Features of travel loan:

This can be utilised for carrying out emergency trips. Interest rates are around 10 %

The liability starts after the trip

The repayment period is from 12 months to four years. Issues like CIBIL rating and other conditions placed before people seeking other loans also have to be tackled

Travel deposit scheme

This facility cannot be used for urgent trips

As the deposits are in instalments of small amounts, the scheme will not prove to be burden

The scheme will earn an interest similar to that of recurring deposits, which is over 6 % at present

In case the planned trip does not take place, the maturity amount can be utilised for some other purpose.

An example

Suppose you are planning a foreign trip a year later which costs Rs 1 lakh. In case you have joined a travel deposit scheme offering 6.50 % interest, an amount of Rs 8,333 has to be paid in 12 equal monthly instalments. On maturity, a sum of Rs 1,03,568 will be obtained. The interest of Rs 3,568 can be considered as a bonus and used during the trip. If the term of the deposit is longer, the interest gained will also go up.

On the other hand, if a travel loan of Rs 1 lakh is availed at 12 % interest, the amount that needs to be repaid in one year comes to Rs 1,06,618. In other words, for Rs 1 lakh, you stand to suffer a loss of Rs 6,618. If the period of repayment is longer, the interest that has to be repaid also will be significantly higher.

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