Should you take a personal loan for your holiday expenses?

6 Mins July 21, 2022

Yes, if it can help meet your need easily without breaking your existing investments

Should You Take a Personal Loan for Your Holiday Expenses?

Before the pandemic, Anup and Sharmila Burman and their two children went on an overseas holiday, every year. The couple regularly put money in a separate fund – apart from their regular investments -- so that they could take that vacation. But during the Covid-19 pandemic, faced with salary cuts, they couldn’t save for the travel fund, as investments for their other goals took precedence.

But now with the fears of the pandemic diminishing and travel restrictions easing, the family is keen to go on a foreign holiday. They are thinking of taking a personal or a travel loan to meet the expenses. Here are the reasons they looked at before making their decision.

Anup did research and found that a week-long holiday package to Dubai would cost the family about Rs. 5 lakh. Considering that he and Sharmila are working and have a good credit history, they are likely to get this loan at about a 14-15% interest rate. The EMI for a three-year loan would be in the region of Rs. 17,000, an amount the couple could easily afford.

Cheaper than spending on credit cards
The alternative to a vacation loan was to fund the holiday using their credit cards. Anup pointed out to Sharmila that while their combined cards did have the required limit to be able to go on vacation, it would max out their card limits. Also, since they will not be able to pay the entire bill amount on the due date, they would be forced to roll over their dues, which are likely to attract a hefty rate of interest – between 2.5-3.9% per month or about 30-46% per annum.

Personal loans are extremely easy to avail of and are very flexible. Personal loans require minimum documentation, which can be filed online. Even the KYC can happen electronically through an online process. For customers with a good credit history, like the Burmans, the disbursement can could occur within hours of applying, if not minutes.

[Also ReadFive questions to ask before availing of a personal loan]

No need to liquidate investments
Anup told Sharmila that the alternative to taking a personal loan or spending on credit cards is to liquidate a few of their investments and use the proceeds to fund the holiday. However, he pointed out that the couple has been investing regularly for a long time and breaking their investments now would result in them losing out on the compounding effect of these investments. In the long-term, this might be costlier than the interest they will pay on their vacation loan.

Sharmila saw sense in these arguments, and after availing of a personal loan, in a couple of weeks, the family is scheduled to travel on their first overseas holiday in two years.

Axis Bank offers Personal Loans ranging from a minimum of Rs. 50,000 to a maximum of Rs. 40,00,000. Axis Bank Personal Loans come with tenures ranging from 12-60 months. So, check out what works for you.

Any salaried employee of a public or private limited company or the government sector between the ages of 21-60 and having a minimum monthly income of Rs. 15,000 is eligible for an Axis Bank Personal Loan. You need minimum paperwork to get this loan: Identity proof (Aadhar card, driver’s license, voter ID), PAN card, proof of residency, and salary slips.

You can find out more about personal loan eligibility and personal loan interest rates or use Axis Bank’s Personal Loan EMI calculator online.

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