How travel loans help open up new horizons

Abhishek Menon went on a 45-day trip to the UK and Europe, two months ago. While the first leg of the trip was with family, the last 20 days were spent exploring Britain with friends. With the budget coming to a little over ₹1.5 lakh, Menon spent ₹1 lakh by maxing out his two credit cards and the rest was from his savings. “I had that kind of money in my bank. But I chose to use credit card because I wanted the liquid cash for emergency," says the 22-year-old, who enjoys going on trips to gain new experiences. Before the trip to the UK and Europe, he quit his job as a junior accounts manager in a Mumbai-based ad agency, as he knew his office won’t give approval for such a long leave.

This is not the first time Menon has followed this funding route. Last year, during a vacation to Dubai, he put a tab of ₹65,000 on his credit cards. He repaid the money in six months.

Jalandhar-based professor Pranjal Pachpure, 32, too follows the same funding strategy for travelling. Pachpure, head (commerce and business management), at DAV University, and his wife went for two vacations between May and June—a short one in Himachal Pradesh and a long one in Kerala. The expenses ran up to ₹1.8 lakh, which he paid through credit card. The repayment was fixed at six equated monthly instalment (EMIs) with 7% interest. “We generally look at EMI options to manage the cash flow rather than having shortage of funds," he says, adding his friends too resort to similar means of financing their vacations.

To gain new experiences and learnings, and to relax and rejuvenate, an increasing number of people are taking several short breaks in a year rather than one long annual vacation. And to fund them, they are opting for travel and personal loans or utilizing the maximum limit of their credit cards. A recent survey by travel company Thomas Cook says there has been a 50-60% growth in travel loans. Its data highlights a surge, especially from travellers in the 25-35 age group.

What’s more, digital lending platform IndiaLends recently claimed that it has reported a 55% growth in personal loans for travel purposes, with nearly 85% of the loan takers being millennials and taking loans in the range of ₹30,000 to ₹2.5 lakh.

New places, new experiences

Observing how several of their customers were taking personal loans for travel purposes, instant loan provider EarlySalary created a separate travel loan offering about four months ago. Co-founder and chief executive officer Akshay Mehrotra says about 18% of their customers were taking personal loans to travel.

Looking at the demand, he decided to carve out the new loan offering. Almost 75% of their customers availing the travel loan fall in the 21-32 age group, and the average loan size is ₹27,000, he says.

“Holidays are no more a once-a-year event. Nowadays, people go on quick vacations if there is a long weekend. At least six times a year, including short getaways, is a minimum now. Also, earlier holidays meant staying in better hotels. But now people opt for Airbnbs and want to experience the place really well. Flight prices are also competitive and we see a lot of youngsters choosing below- ₹10,000 airfares," says Pune-based Mehrotra, who claims they have been clocking 1,500 travel loans per month.

The trend is not restricted to millennials, though. Kavita Kumble, 44, the chief manager at IDFC First Bank, took a personal loan of ₹12 lakh at 12% interest from her employer, a year-and-a-half ago for her solo trip to Antarctica and the Brazilian Amazon. The cost of the Antarctica cruise itself came to about ₹7-8 lakh. “I was apprehensive when I saw how much it would cost. While I invest in mutual funds, I didn’t want to break them. And since it was going to be a once in a lifetime opportunity, I decided to take the loan," says the Mumbai resident, who has a 15-year-old daughter. Kumble will be done paying off the loan in another couple of months.

“My mother was an avid traveller and travelled within India alone while we were growing up. So I get my inspiration from her," says Kumble, who goes on a family vacation once a year.

The perception that only millennials resort to such unconventional funding routes of travel funding, believes Kumble, is not true.

“It’s the attitude. Interestingly, my boss was shocked when I told that I had taken a loan to travel," she recalls. Kumble plans to do the Trans-Siberian trip next year. Will she take a loan for it? “Yes, I think, I will," she says.

Anuya Chakravarthi, a communications manager at an OTT platform, too, won’t hesitate to take another travel loan. The 33-year-old took a bank loan of about ₹1.35 lakh about six years ago after her parents refused to fund her trip to attend her best friend’s wedding in Florence and then travel within Europe. They were uncomfortable with the idea of her travelling alone, she says. So, Chakravarthi just called the bank where she had a savings account, did the necessary paperwork and received a loan within a day.

“It wasn’t an expensive trip since I stayed in hostels. But it was an interesting experience. I may not be the best person when it comes to saving money, and with something like this (a loan), you are stuck. But I could pay the EMIs comfortably (the interest rate was somewhere between 9-13%)," says Chakravarthi. She paid back the loan over the next 18 months.

The benefits

One of the biggest reasons people are ready to pay EMIs is the experience they acquire while travelling and how it helps them grow personally and professionally.

Abhishek Menon in London

Taking loans or using credit cards is a good way to become responsible with finances, says Menon. “I keep enough cash reserve to tide me for three months. This way the EMI payment doesn’t get effected. Also, I am very disciplined about paying on time even if I have to be frugal with my day-to-day expenses at times."

Last-minute changes in travel plans, meanwhile, has taught Kumble to stay calm and tackle any kind of situation with ease. “I had to stay back for a couple of days in Argentina while coming back from Antarctica because the country had a sudden strike. All the flights were cancelled. I didn’t know the language or the place. But I managed to get my tickets re-booked and get a hotel as well. So, you learn to handle situations during stressful times," she says.

For Panchpure, on the other hand, travelling has been a great way to network with different kinds of people. Exposure to varied cultures, he says, has helped him in his teaching as well. Sharing an experience, he says, “I had travelled to Manipal, first on an official trip and again on a leisure trip. During my stay there, I found out how the district exported a geographical indication-tagged vegetable from the brinjal family, called mattu gulla, to France. This gave me some ideas, which I used in my projects," he says.

Chakravarthi believes travelling solo is the best thing that can happen to you. “It taught me how to deal with unfamiliar places. Also, you meet people from different parts of the world, you become such a good storyteller, which helps in my profession." Chakravarthi is now eyeing a trip to New Zealand, and plans to take a bank loan for it.