Travel now, pay later

Soaking in the sun in Seychelles or skiing in the Swiss Alps need not just remain in the realms of fantasy for the Indian middle class - travel loans are making their dreams come true.

The array of 'travel now, pay later' options has made overseas travel the trend du jour even for middle-class Indians.

While major travel companies have tied up with financiers to offer easy repayment terms, banks too are getting into the picture with special travel loans, along with the older personal loans product.

Says Gaurav Malik, retail manager, UTI Bank, "We provide travel loans at the rate of 15 per cent, including the processing time of about seven days, and tenures between 12 and 36 months. In addition to the package cost, you pay a refundable deposit of Rs 10,000 per person and a flat processing fee of Rs 500.

For the paperwork and other tour formalities we have arrangements with a reputed travel company."

"Banks offer 'Easy Travel Loans'. The loan gives you the benefit to holiday now and pay later in easy installments. It has been exclusively designed to put exciting holidays within the reach of the middle-class family. You can avail of the

loan for a holiday, whether it is a domestic or an international package," says Tanuja Pandey of Thomas Cook.

"The last couple of years has seen a steady increase in the number of people travelling abroad for leisure. The peak season is between April and May, when people take various packages and we expect the traffic to go up even further in the coming weeks, says Tanuja.

Most travel agencies offer loans in collaboration with finance companies and banks at rates ranging between 11 per cent and 16 per cent, and tenures are usually between 12 and 36 months.

The interest rate for this loan in private banks is 14-16 per cent, and PSUs give it at the rate of 11-12 per cent. The documentation required is proof of income and residence. The schemes cover airfare, accommodation, meals and sightseeing.

With the market for travel loans growing, some public sector banks too have joined the race. However, as always, personal loans from banks continue to be available and can be used for travel. The catch is their high interest rates.

"To avail of these loans, you need to live within city limits in one of the metros, be between the age of 21 and 60, and have an income of Rs1-1.20 lakh per annum. The tenure is 12 to 36 months. No security or guarantee is required and the documentation and processing is fairly simple. A good credit card record is also accepted," informs Malik.

"The big drawback, however, is the effective interest rate, which is steep. With lenders collecting two EMIs up front, interest rates range between 18 per cent and 21 per cent, compared to travel loan at about 15 per cent.

Also, while banks usually charge a processing fee between 1 per cent and 2 per cent of the loan amount, taking a loan via a travel company lets you slash your processing fee to about 0.5 per cent," travel experts say.

"Another way to fund your vacation is to take a loan against securities such as listed shares, RBI bonds, FDs or gold. The interest rate here is lower, typically 11-12 per cent," Malik says.

"The advantage with travel financing, of course, is that the few extra dollars gets you an exotic holiday at fairly manageable monthly repayments," said an official at Raj Tour and Travels.

So if you need to get away from the country's melting heat and soul-crushing traffic jams, if work is just becoming too much, if you're starting to hallucinate or lose hair, get in touch with the nearest bank.

In fact, do so even if you're happy, well adjusted and just off the plane from the Bahamas. Because with prices as low as these, who needs a reason?