A very disturbing trend is emerging, where Travel loans are on the uptick compared to other loans. With so much exposure and high level of aspirations, it is but natural for individuals to have an urge to travel. The increase is more apparent in Tier 2 and Tier 3 cities, focused more among gen Z.
Travelling is a great eye-opener and only when you travel do you realise how different cultures are and what a small part you are of the entire universe.
However, funding the holiday with a loan is breaking the holy grail of financial discipline. Travel loans don't come cheap. The interest rates go as high as 20% per annum. Ideal scenario for all who have been bitten by the travel bug, would be to start a separate SIP and use those funds to fund your holidays.
Remember that your loan cost will be higher, most of the time, than your income and you have taken a loan for consumption (expenditure funding) not for asset creation. Travel will give short term pleasure but could become a long-term pain if funded by a loan. So take care and resist the temptation.
Understanding the Psychology Behind Travel Loans
Many individuals, especially Gen Z in Tier 2 and Tier 3 cities, face increasing peer pressure and FOMO (Fear of Missing Out) driven by social media. This often leads to impulsive decisions like financing travel via personal loans, just to keep up appearances. Unfortunately, what starts as a short-term thrill can create long-term financial stress.
Use SIPs to Build a Travel Fund the Smart Way
Instead of opting for high-interest travel loans, consider goal-based investing. A Systematic Investment Plan (SIP) in mutual funds can help you build a travel fund over time—without burdening you with EMIs. To understand how much you should invest monthly to meet your dream vacation budget, try our free Mutual Fund Calculator. Simply set your goal, time horizon, and expected return to get started.
Travel Without Regret – The Financially Prudent Way
Travel should enrich your soul, not empty your wallet. Choosing to save first and spend later reflects financial maturity. By planning well in advance, you ensure that your trips are free from post-vacation stress caused by loan repayments. Let your wanderlust be fuelled by smart saving, not by debt.
Final Thoughts
Indulge your passion to explore, but make your money work for your goals. Whether it’s a solo Europe trip or a family vacation, save, invest, and spend wisely—don’t let interest payments be the price you pay for memories.
"Work; Travel; Save; Repeat"
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