Christmas carols are already in the air. It is that fag end but the much awaited time of the year when you plan a vacation or family outings. While it always helps to have a long-term holiday fund, there can always be a scenario when one isn't prepared to deal with slightly unpredictable vacation expenses. But nothing to worry, you can still have a Christmas-New Year blast!
In this article, we take a look at 5 options that can help you in arranging funds to have a joyful Christmas vacation.
Personal Loan
If your income is good, then fetching a Personal Loan would not be difficult as banks don't ask for collateral/guarantee or the reason for borrowing. It usually takes just 3-4 days for a loan to get sanctioned. Banks/NBFCs charge interest around 14-21% a year as this is an unsecured loan and you could struggle with repayments. The processing fees are normally about 2-2.25% of the loan amount sanctioned.
Travel Loan
Banks offer Travel Loans at an interest of around 12-20% a year for airfare, hotels, travel insurance and holiday packages. What's good about travel loans is they are both secured/unsecured. For amounts above Rs 2 lakhs banks ask for collateral, but as this is a secured loan interest rate is lower than personal loans.
Understand terms and conditions before taking a travel loan:
- Travel loan EMIs must not be more than 40% of monthly take-home salary
- Travel loans must be repaid within a couple of years
- If salaried, you need to be between 21-58 years of age; employed with a reputed company and working for at least 2 years in that company. If self-employed, banks would check the business record.
- Banks also check identity/address proof, three month's salary slip; you should have filed ITR for at least 2 years. For businessmen, banks check business ownership documents.
Loan Against Securities
Another way through which you can fund your Christmas vacation is Loan Against Securities, mainly loan against shares. Banks have a list of approved shares against which they lend.
Banks could lend up to 50% of the value of shares. They create a lien against these shares and you cannot sell them.
Banks open a current account with an overdraft facility and set the borrowing limit based on the value of shares. You withdraw the money from this account through an ATM or internet banking facility and repay by depositing money back into the current account. This is much easier than an EMI-based loan.
Borrow With A Credit Card
Credit Cards remove the burden of carrying cash on vacations. You could use a credit card for travelling and shopping. Credit cards come with interest rates of around 2-3% a month, which kick in if you don't pay the amounts due in time.
You could try using a co-branded credit card. These cards are jointly issued by banks and service providers (airlines/hotel). These credit cards are just like normal credit cards, but offer special benefits provided by the service provider.
Use credit cards associated with hotels, cabs, airlines and railways. You could get free flight ticket vouchers/air travel insurance if you book through associated airlines. Associated hotels offer free stay or room upgrades at partner hotels.
Borrow From Relatives And Friends
This should be your last resort in case you are not successful in fetching a loan for yourself. Loans from friends and relatives are usually interest-free and if you can make the repayments in time, then do go for it.
Insist that your friend/relative accepts a promissory note. This is an unconditional promise that you will pay a fixed amount on demand or by a specified date and sign it.
(The author is the CEO of BankBazaar. Views expressed in the article are personal).
