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Travel Loan
Travel loan refers to loan availed for travelling to tourist places that are faraway and will require higher amount to meet travel expenses. Vacationing abroad has become a fad, in this generation where instant gratification takes a front seat. Travel loans enable the individual to plan for elaborate vacations. These travel loans are for shorter duration and lower value. These are typically unsecured loans and hence, many banks offer them under personal loan. The interest rates are typically high on these loans.
Travel loans are more popular among the urban populace, many banks are yet to introduce this segment as a separate loan. Personal loans are extended which are used by individuals towards travel. Few banks such as HDFC Bank, ICICI Bank, Axis Bank and State Bank of India offer specific travel loans. Both private and public sector banks offer travel loans to individuals who are eligible with a view of enabling them to realize their dream of traveling to various holiday destinations. As part of their promotional offer, they offer attractive interest rates and other features especially during the holiday season.
Travel loans are unsecured loans and are extended purely based on the applicant’s ability to repay the loan and credit score. If the credit score is high, then the applicant can negotiate a nominal interest rate. Typically, for personal loan or any other form of unsecured loan, the bank will insist on a credit score not less than 750. The loans are extended without the need for any guarantor. If the travel loan exceeds Rs. 2 Lakhs, then the bank may insist on a guarantor or collateral.Types of travel loans
There are various types of travel loans which can be extended to individuals based on their eligibility –
- Foreign travel :
Foreign travel loans are available at higher loan value, they cover air tickets, lodging facility, sightseeing, tours etc. Individuals can apply for the loan to cover the expenses for themselves and their relatives.
- Domestic travel :
These loans are extended for travel within the native country. The applicant can apply for expenses covering self and relatives. The value of the loan in this case will be much lower than that of foreign travel loans.
- Senior citizens :
There are few schemes available that cater for senior citizens travel expense requirement. These loans are available at preferential interest rates.
- Personal loan : Many banks do not label their loans depending on their use. They merely extend unsecured loans which are tagged under personal loans. The borrower may use the loan for travel purposes.
Travel loans may not be categorized as foreign or domestic travel loans by many banks. The quantum of loan may be decided based on the income of the applicant and the credit score of the applicant. In such case, the loan so borrowed can be used for either domestic or foreign travel. Each bank may have their own set of eligibility criteria and regulations pertaining to unsecured loans including travel loans. The applicant has to clearly understand the requirement and apply accordingly.
Key features of travel loans
- Lower value of loan :
The quantum of loan can be as minimal as Rs. 10,000/-. The loan value up to Rs. 2 Lakhs does not require any collateral or guarantor. Typically travel loans exceeding Rs. 2 Lakhs need either a guarantor or collateral. However, these terms may vary from bank to bank. Loans are often considered on a case to case basis.
- Loan disbursed as required :
The loan is disbursed as per requirement. The borrower can get an estimate of the entire trip and accordingly apply. Often, many of the holiday package dealers have tie-ups with various banks. The aspirant can apply with one such bank where in the documentation and disbursement will happen smoothly.
- Short and medium repayment tenure :
The repayment tenure can range between 12 months to 60 months. Travel loan may be extended as a personal loan which will have a repayment schedule as low as 3 – 6 months.
- Processing fee as per banks’ terms :
The processing fee is as per the banks terms, however, when there are tie-ups with holiday package dealers, there is no requirement for elaborate due diligence, hence the bank may either offer the loan at 0% processing fee or at a discounted rate.
- Holiday promotional offer available :
Most banks conduct promotional campaigns with low interest rate, zero processing fee, low time lag in application and disbursement of travel loan etc., These campaigns are typically carried out during holiday season.
Eligibility criteria for travel loans
The travel loan is like any other unsecured loan also called personal or signature loan. It is extended to salaried employees or self-employed professionals. The eligibility will differ from bank to bank, but the broad guidelines for eligibility of travel loans is as mentioned below –| Age | Minimum 21 years |
| Maximum 65 years | |
| Nationality | Indian |
| Employment Type | Salaried or Self-employed |
| Employment status | Employed/In-business for at least 2 yrs. and at least 1 year with current employer/business |
| Minimum Income | Rs.4000 - Rs.20000 per month (Varies according to area, which is higher in cities) |
| Tenure | Minimum – 6 months or 12 months |
| Maximum – 60 months | |
| Credit Score | Preferred 750 |
Documents required for a travel loan
The documents required for travel loans would differ from bank to bank, however, broadly, there are standard documents which are required for all types of unsecured loans. The documentation may be similar for travel loans. The processing is done relatively fast to ensure that the applicant receives the funds on time to vacation during the holiday season –
- Application form with photographs
- Salary statements, Form 16 or ITRs for salaried employees
- Profit and loss statement, Balance sheet and ITR for self-employed professionals
- Bank statements of last 6 months
- Address proof, Identity proof, age proof – PAN, driver’s license, Aadhaar card, passport or any other document issued by Government of India can be used as proof
- Estimation of the trip expense including air tickets, stay, touring etc.,
- Age wise representation of the individuals for whom the loan is being applied for
Interest rate applicable on travel loan
Travel loans are unsecured loans extended by banks, the interest rates are broadly similar to that of the personal loan extended by the bank. There are two types of interest rates applicable on all types of unsecured loans. Travel loans are typically fixed interest rate loans given that the tenure is shorter.
Below is the list of top banks and the interest rate charged on travel loans -
| Bank | Travel Loan Interest Rates | Processing Fee |
|---|---|---|
| SBI Travel Loan | 12.50% | In the range of 2% to 3% |
| HDFC Bank Travel Loan | 11.25% | Min 0.99%, Max 2.50% Up to Rs. 10,000 |
| ICICI Bank Travel Loan | 11.25% | Starting from 0.99%, Up to 2.25% |
| Citibank | 10.99% | Upto 0.5% |
| Axis Bank | 11.25% | 1.50% to 2.00% |
| Kotak Bank | 11.50% | Upto 2.5% |
Travel Loans: Frequently asked questions
1. What are the documents required for availing a travel loan?
Documents – address proof, identity proof and good credit score are important to avail travel loan from banks.
2. What are the key benefits of travel loan?
The key benefits of travel loan are –
They are cheaper than using credit from credit cards
Travel loans offer flexible repayment tenure ranging from 6 months – 60 months
Loan processing is quick and hassle – free compared to other types of unsecured loans
Loan amount is as per requirement and disbursement happens as and when required
Prepayment of loan is available as per banks regulations
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