Whenever you have a shortage of funds, it is quite normal to rely on a personal loan. The reason could vary from hosting a wedding, an emergency in personal life, and renovation, of home to higher education. Some travel buffs, meanwhile, may consider taking a personal loan for such discretionary expenses as travel.
Is it worth taking a loan for travel?
Experts suggest that borrowing for travel is not an advisable thing to do. Travel, at the end of the day, is a luxury and can be avoided or deferred, or even cancelled. Taking a personal loan comes with a cost – interest at a very high rate.
“I never advise my clients to borrow money for non-essential things. If they need money for a wedding or a renovation at home, it is still understandable. But if someone borrows for discretionary spending, it is a ‘no’ with capital N,” says Deepak Aggarwal, Delhi-based chartered accountant and a wealth advisor.
Preeti Zende, founder of Apna Dhan Financial Services, echoes similar sentiments. “If you want to plan for a vacation, it is always better that you fund it through your savings rather than going for a personal loan. Such easy loans may lead us to a debt trap as they reduce our saving rate, which eats into wealth creation,” she says.
In what scenario is it okay to take a loan for travel?
There could be very few instances wherein you can borrow money when it falls short of the disposable cash that you have. You could have other financial assets, such as stocks and mutual funds, but you do not want to redeem them for obvious reasons.
For example, you intend to spend ₹2 lakh on your holiday. You have savings, but do not intend to exhaust them on your trip. Therefore, you decide to borrow a portion of it but only for the time being, with the intent to repay the loan in the next few months when you have access to more liquid assets.
These are some situations wherein a loan for travel could be feasible:
>> When you are taking a loan for a part of the total expense. e.g, you are taking a loan for only ₹50K when the total expense is ₹3 lakh.
>> When you have access to other sources of money also, but do not intend to redeem them, e.g., stocks, FDs, and mutual funds. So you intend to borrow for a couple of months.
>> When travel is important and may help you in your career, with networking opportunities on offer.
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