Looking to Pre-pay Your Travel Loan? Keep These Things in Mind Before You Do

If you are short of cash, yet want to travel the world, it’s a good idea to take a travel loan. While loans itself may give you goose bumps and sleepless nights, it makes sense to avail a personal loan for travel instead of using your credit card continuously or dipping into your savings.

If you can avail a personal loan for a wedding or for home repairs, then why not travel. Yes, a travel loan is nothing but a personal loan taken for the purpose of travelling. With a travel loan, you can sponsor all the expenses that you will incur on your vacation.

The whole concept of the travel loan is just like your personal loan. It will involve an EMI, interest and the documentation for the same is also the same.

Now, if you take a travel loan from financial institutions such as Tata Capital, you can select the tenure of your choice, and gradually repay the loan according to your convenience. Before applying for the loan, you can check a personal loan EMI calculator to get an idea about what could be your tentative EMI.

You should have enough dispensable cash in your salary component so that you are easily able to pay the EMIs on time.

While you have a timeline when it comes to paying your EMI, you also have an option to pre-pay the same. Why stay in debt when you can be debt-free is the basic philosophy that Indians are often guided by. So, how do you go about pre-paying a personal loan for travel? Here are a few things to keep in mind:

  1. If you have enough money in the first place, there is very less chance that you would take a personal loan? But what if you landed up a jackpot soon after you took the holiday loan? Suppose you take a travel loan, go out on a lush vacation, and come back and hear that an old aunt has left some ancestral property in your name. You can sell that property and pre-pay your personal loan. Or maybe an old friend, whom you had lent some lump sum money, gives it back to you, or you get a huge performance bonus from office post appraisal. Sudden cash flow can come from anywhere. You can use this cash to pay off your personal loanin part or in entirety.
  2. Even if you have decided to pre-pay your travel loan, you must remember that sometimes there are certain terms and conditions that don’t actually allow you to pre-pay the loan before a certain period. For instance, most banks have a lock-in period of one year, only after which you can start pre-paying your personal loan.
  3. Financial institutions such as Tata Capitalallow you to pre-pay your travel loan in full or in part. You can choose to either pay the entire outstanding in one go or perhaps reduce your EMI by making a partial payment of the principal. Tata Capital allows you to pay the entire or part of the loan after 180 days of releasing it. So, in this case, the lock-in period is around six months. Before completion of 180 days or six months, you cannot initiate any pre-payment.
  4. In some banks and financial institutions such as Tata Capital, partial payment does not attract any charges. Complete pre-payment, however, will attract a pre-payment fee on the principal outstanding. You can use an online personal loan EMI calculatorto see how much money you intend to pre-pay. If you are part paying, it is fine, but if you are repaying off the entire holiday loan that you had taken for the purpose of sponsoring your dream vacation in Mauritius or Greece, then you will have to bear some extra cost. Seek expert advice or simply open a personal loan EMI calculator to find out if paying the EMI for three years is actually more cost-effective than paying off the entire travel loan alongside the extra charges that you will have to incur.
  5. What do you do when you have lump sum cash in hand but your lock-in period is still not over? You can put the cash as a fixed deposit in a bank or financial institution for one year or six months. Once your lock-in period is over, you can take out the FD on maturity and pre-pay your loan in part or full. In case you are paying in full, perhaps the interest which you will get from the FD will compensate for the extra charges that you may have to incur for full repayment of your loan.

Pre-payment of personal loan is a good practice because ideally, no one should stay in debt. While a travel loan gives us the freedom to explore the world and ourselves and relax in the lap of nature without having to worry about expenses, constant worries about repaying your loan should not block your mind while you are holidaying. And that is why, once you are back from your holiday, it’s best to start pre-paying your loan whenever you have some dispensable cash. This way you will be able to enjoy life and at the same time be debt-free.

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