Traveling is one of those therapies that work when you are stuck with mundane life and look out for peaceful moments. Sure, many of you try to save adequate funds to achieve this short-term goal of traveling. However, often there are times you witness monetary mismatches i.e., you require some funds over your savings. In such times, you can opt for a travel loan, a variant of a personal loan. Like personal loans, travel loans come with minimal documentation, quick disbursal, zero collateral, attractive interest rate, flexible repayment tenure benefits.
However, as a credit card is an alternative option and due to its ready credit availability feature, you may be attracted towards it to meet your travel expenses.
Here are reasons justifying how it is better to opt for a travel loan as compared to a credit card:
- Higher loan amount
In the situation of a travel loan, loan proceeds can range anywhere from Rs 50,000 to Rs 25 lakh. Sanctioned loan proceeds depend upon your repayment capacity. However, in the case of a credit card, as the proceeds that you can use to meet your travel expenses depend upon your sanctioned credit limit, you may end up consuming a huge portion of your limit to fund your travel. The limit you use must be repaid in full within the due date, most probably by the upcoming month to avoid any penalty like finance charges and late payment fees. In case you decide to convert your outstanding dues on credit card into EMI, your limit gets blocked temporarily and is released as and when you repay your EMI. Doing this may negatively impact your spending capacity through your credit card, particularly in times of financial emergencies.
- Lower interest rate
Personal loan interest rate ranges anywhere between 10.25 % and 24 % p.a. based upon your credit profile and the selected lender. However, in the case of credit cards, you are charged with finance charges of as high as 52.86 % p.a. on the outstanding due if you fail to repay your bill by the due date. Additionally, a late payment fee in a credit card may be charged as high as Rs 1,300 per month if you fail to repay the minimum amount due by the due date. In case you choose to convert your outstanding dues on a credit card into EMI, then also the interest rate charged on it is a notch higher than the interest rate on a personal loan.
- Flexible loan tenure
Personal loan repayment tenure can range anywhere from 1 to 5 years with some lenders offering a higher tenure of up to 7 years. However, in the case of credit cards, the interest-free period goes just up to 55 days. On conversion of your credit card outstanding due into EMI, you may avail a tenure of up to 5 years, along with a relatively higher rate.
- No conversion or markup charge
If you are traveling abroad, you can load the loan proceeds from the travel loan to forex cards to save the markup charges. However, ensure to load the forex card with the same currency that the country accepts to avoid any charge, or you may avail a zero cross currency conversion forex card. Opting for a zero-currency conversion forex card permits you to fund your travel expenses at zero conversion fee. However, in the case of a credit card, if you swipe it abroad, your issuer will charge a cross-currency markup fee, which may be as high as 3.5 % of the transaction amount.
Conclusion
Travel loan fares better than the credit card on grounds of the higher loan amount, lower interest rate, flexible tenure, and no markup charge if forex card is loaded with the proceeds. However, before you click on the personal loan apply button, ensure to consider amongst lenders to get a suitable deal at a lower interest rate. Once you have selected your lender, use the personal loan EMI calculator to figure out an optimal personal loan EMI.
