How A Personal Loan Could Make Paying Off Holiday Debt Easier

It is always good to plan a vacation that fits one's budget. But life is full of choices and the urge to splurge may cost more. Utilizing personal savings to cover holiday costs is always the best financial decision. But if that interferes with one’s financial goals, borrowing from banks and NBFCs and making subsequent payments on a monthly basis for a period is the best way to fulfill one's dream without burning a hole in the pocket.

Funding a travel plan through personal loans can help to explore exotic locations, new cultures, and cuisines. It can be used to cover airfare charges and other transportation costs, hotel accommodation, food and even shopping.

Personal loans are unsecured loans, meaning they require no collateral. Getting funds through personal loans is just a matter of hours. These are usually short to medium-term loans with flexible repayment structures.

There are many banks and financial institutions that readily offer personal loans. Using a personal loan to fit all travel and holiday expenses can be a good alternative to using a credit card, which have become convenient way to pay for purchases over the past few years.

Here are some reasons that make personal loans the best alternative for managing all holiday expenses.

Be Aware Of The Total Costs:

Credit cards are revolving credit meaning one can borrow money as much as is needed. Vacationing on a credit card without having saved up the money for a vacation could be costly. Comparatively, a personal loan can be an ideal choice because it is much more predictable than credit card debt.

Personal loans are taken on fixed interest rate. So, when one takes a travel loan one knows how much to pay back in total to the lender. On the other hand, for credit cards one is required only to make minimal payment. But a closer look at the minimum payment requirement will reveal that it could essentially mean paying off only the interest. It does not bring down the total balance, possibly leading to an endless cycle of clearing debts.

Paying Off Lesser Interest:

Credit cards have higher rates of interest than interest rates on personal loans. Interest is the price that the lender charges to lend money. When interest rates are high, borrowing becomes expensive. This is because with a higher interest rate, one ultimately ends up paying more in interest payments over the loan period.

Fixed Repayment Tenure:

The minimum payment requirement, especially with the high interest rates of credit cards, could essentially mean paying off the same balance for years. But a personal loan has a fixed repayment tenure and clearing the loan amount in full closes the personal loan account. Borrowers can also repay the whole loan amount before the binding due date.

Conclusion

A large number of holiday lovers execute their travel plans with credit cards. However, financing a vacation by swiping credit cards could result in serious consequences. It is true that just like pre-approved loans, credit card loans do not require any documentation. But it must be noted that the monthly interest on credit cards is charged on the initial loan amount and it remains the same for the entire tenure, even if the principal decreases.

Falling into a holiday debt can be a regretful experience. An alternative tool to credit card loans can be personal loans. In both forms of borrowing, funds are offered at a specified interest rate. Also, there are penalty charges in case of missed payment. Irrespective of the option one decides to stick to, it is advisable to evaluate one's financial obligation before borrowing.

IIFL Finance offers its customers personal loans for up to Rs 5 lakh for as long as three and a half years with minimal documentation. As lenders have no restrictions on usage of funds, the proceeds from the loan can be used to plan a much-awaited holiday. For the convenience of customers, IIFL Finance entire loan application process can be completed online withing minutes and the loan can be sanctioned and disbursed in just a couple of days.