Are you planning your next vacation but worried about the expenses? Travel loans are one of the best ways to finance your dream vacation, but it is important to consider all the factors. These days, many lenders in the market offer travel loans. Finding the lowest interest rate on a personal loan can be overwhelming. Understanding the process of finding the best interest rates for a travel loan can help you fund your trip without financially overburdening yourself.
Understanding Travel Loans
A travel loan is a type of personal loan offered by banks and Non-Banking Financial Companies (NBFCs). These personal loans help fund your travel expenses, such as flight tickets, hotel bookings, and other miscellaneous costs. This is possible because a personal loan for travel does not have any usage restrictions, meaning you are free to use the funds as you see fit.
Why Interest Rates Matter in Travel Loans
The personal loan interest rate determines how much you will pay over and above the borrowed loan amount. A higher interest rate increases the overall cost of your loan, while a lower interest rate makes your loan more affordable.
Factors That Influence Interest Rates on Travel Loans
A lender will thoroughly scrutinise your travel loan application before deciding on the interest rate it will offer. Understanding these factors is essential as it can help you stay informed and make better financial decisions.
CIBIL Score
Lenders check your CIBIL score to assess your creditworthiness. Ensure that your credit score is over 750 when applying to increase the chance of getting better lending terms and lower interest rates.
Income and Employment Status
Lenders prefer applicants who have a stable source of income. Salaried applicants with a steady income often get lower interest rates.
Loan Tenure
Ensure that you choose an appropriate tenure for your travel loan. A shorter tenure attracts lower total interest but has higher EMIs whereas a longer tenure will have lower EMIs but will increase the interest output.
Relationship with Lender
Existing customers of banks and NBFCs often get preferential interest rates. You can apply for a loan with your existing bank, where you have a salary account or an ongoing loan, to stand a chance for getting better interest rates.
Lender Type
Interest rates differ from one lender to another. Most private financial institutions and NBFCs may charge higher interest rates than public sector banks.
Economic Conditions
The interest rate for a personal or travel loan depends on current market conditions. Keep track of the repo rate to negotiate better lending terms.
Comparing Loan Providers: Banks and NBFCs
There are several lenders in the market that offer travel loans. The terms on which these personal loans are provided differ from one lender to another. Before applying for a personal loan, compare the interest rates being offered and choose the one that fits your needs.
Banks Offering Personal Loans at Affordable Interest Rates
Here is a list of banks offering personal loans at affordable interest rates:
| Bank Lenders | Starting Interest Rate (p.a.) |
| Axis Bank | 11.1% p.a. |
| HDFC Bank | 10.85% p.a. |
| ICICI Bank | 10.85% p.a. |
| IndusInd Bank | 10.49% p.a. |
NBFCs Offering Personal Loans at Competitive Interest Rates
Here are list of NBFCs that offer personal loans at competitive interest rates:
| NBFC Lenders | Starting Interest Rate (p.a.) |
| Fibe | 14.00% p.a. |
| Finnable | 15.95% p.a. |
| IIFL | 18.00% p.a. |
| InCred | 16.00% p.a. |
| Kissht | 14.00% p.a. |
| Kotak Mahindra Bank | 10.99% p.a. |
| KreditBee | 14.00% p.a. |
| L&T Finance | 12.00% p.a. |
| MoneyTap | 18.00% p.a. |
| Moneyview | 16% p.a. |
| mPokket | 24.00% p.a. |
| Muthoot Finance | 14.50% p.a. |
| Olyv | 18.00% p.a. |
| PaySense | 14.00% p.a. |
| Privo (Credit Saison) | 9.99% p.a. |
| SMFG India Credit | 12.00% p.a. |
| Upwards | 18.00% p.a. |
| YES BANK | 12.50% p.a. |
| Zype | 18.00% p.a. |
Disclaimer: Interest rates may vary. It is advised that you check with the lender for the latest rates before applying.
How to Improve Your Eligibility for Better Interest Rates
You can reduce your repayment burden by getting a lower interest rate on your travel loan. Lenders decide the interest rate based on several factors. Meeting the eligibility criteria can help you secure better lending terms.
CIBIL Score or Credit Rating
Your credit score directly impacts the interest rate offered to you. A higher CIBIL score indicates that you are financially responsible, which could in turn reduce the lender’s risk.
Loan Tenure
The tenure that you decide on affects the interest rate as well. A shorter tenure may attract a lower interest rate but will also result in higher EMIs.
Income Source and Employment
Lenders usually prefer borrowers with a steady source of income. A consistent income reassures the lender that the risk of default is low.
Joint Loan Application
Applying for a travel loan with a co-applicant or guarantor can help improve your eligibility. Your interest rate could be lower if your co-applicant has a strong financial profile.
Lower Debt-to-Income Ratio
A higher debt-to-income ratio can impact your personal loan eligibility. Your loan application can attract a higher interest rate if you have multiple loan accounts and credit card dues.
Compare Loan Offers
When applying, it is important that you don’t settle for the first loan offer that you receive. Compare the different banks and NBFCs offering loans to get the lowest interest rate.
Interest Rate Type
Lenders offer fixed and floating interest rates for personal loans. A fixed interest rate stays the same throughout the tenure of the loan, while a floating rate keeps fluctuating based on the prevailing market rates.
Secured Loan Option
Travel loans are mostly unsecured in nature. However, if you have a fixed deposit, then you may pledge it as collateral to get a secured loan at a lower interest rate.
No VCCircle journalist was involved in the creation/production of this content.
