Why Travel Loan is Cheaper than Credit Cards

by Shruthi K. Finance Advisor

Traveling is not a leisure activity anymore, it is a lifestyle! Travel bug has bite almost every adult in India. With increasing number of people who love to take multiple international and domestic trips in a year, credit card companies and banks are exploring opportunities to increase their lending transactions. Unlike our previous generation, for whom traveling was the least of their priorities, we push travelling to one of the top priorities in our life. Travelling is important so is funding your travel expenses. Although planning well in advance, opening a RD account to meet travel expenses and setting aside funds every month is ideal, last minute trips can also happen. That’s exactly when you are faced with two options, either use your credit card or apply for a personal loan.

What is a personal loan?
A loan that is granted by the banks without any collateral that can be used for any personal reason like weddings, trips, clearing an existing loan or to pay your debt is called a personal loan. Many leading banks offer personal loans at excellent interest rates.

What is a credit card?
Credit cards are issued by many banks to their customers which allows them to pay their bills or makes purchases on credit. The bank assigns a credit limit against each card and allows their customer to use the money that is not theirs for any reason and bills them monthly for the amount used plus the interest rate.

5 reasons to choose personal loan over credit card

Personal loans gives you more time to payback
When a personal loan is sanctioned, the payback tenure is usually between 2 to 5 years. Whereas, amount spent from a credit card has to be paid in full within a month or high interest rate will be added every month till the total amount is cleared. If you are travelling, a travel loan will suit your needs as you will have ample of time to come back, settle down and to start paying your EMIs without any hurry.

Interest rates on personal loan is cheaper than credit card
In comparison, credit cards attract high interest rates than personal loans. Currently, personal loan interest rate in India ranges from 13% to 20% per annum. On the other hand, credit card companies calculate interest on the total amount spent from the credit card every month. This way, if you use a credit card to meet your travel expenses, you’ll have to pay interest for the revolving debt every month.

Fixed Equated Monthly Instalments which allows you to budget
Personal loan agreement will clearly state the EMI amount to be paid every month, the interest rate and the tenure of the loan. You will be aware when your loan will end and you can plan your other expenses in accordance with this. However, in credit cards the minimum due amount to be paid every month and the total amount due changes every billing cycle. The revolving debt is always a burden and continues for a long time. These kind of undefined payments doesn’t help you in personal budgeting.

With personal loans, you don’t get tempted to spend
Spending from your credit card is like paying with the money you don’t have. It means that you are taking credit from the bank. With a credit limit already sanctioned to your card, the banks give you the purchasing powering which often tempts you to spend even when you don’t actually need to. However, when you apply for a personal loan, which is usually a lump sum amount, you know the reason why you applied for it and will use it for that particular purpose only.

Personal loans lets you borrow more funds than credit cards
The amount that can be approved by banks for personal loans is higher than the amount they can credit to a credit card. If you are looking to borrow a lump sum amount, personal loan is the best option.

Whether you want to see the majestic mountains of The Himalayas or enjoy playing in The Disney World, a travel loan is the best way to fund your travel expenses. Get in touch with a bank that offers personal loans at low interest rates and enjoy traveling.