What if you could take a travel loan? That is with enough funds to budget your travel right now, you take a loan, vacay, and then pay later. If this sounds appealing to you, the ‘Travel Now Pay Later’ (TNPL) feature is the best option for you. However, one needs to be mindful before choosing these options as they come with a baggage of EMIs and require consideration of your financial situation post-travel. Today, the market is abreast with travel companies offering TNPL schemes just like the fad of ‘Buy Now Pay Later’ by multiple fintech platforms and banks.
How does TNPL work?
TNPL is basically a loan or credit you take while booking a trip. It staggers any direct payment to be made for such bookings and then allows you to pay it off later in EMIs.
Online travel companies and other travel agencies usually tie up with fintech firms, banks, loan apps, and third-party lenders, offering credit through their fintech features. In some cases, you may need to approach the banks or third-party lenders directly to avail of the scheme.
Some travel firms also extend the option to either pay partially at the time of booking or not at all. You can make payment at a later stage in a specified duration. Depending on the travel platform offering TNPL, you can get no-cost EMIs or pay an interest rate on the loan amount. The interest depends on the quantum of funds and the duration for which you take the loan.
What options do you have?
Since the market is flooded with customised or particular platform-based TNPL options there is no concrete homogeneity of this scheme. Travel companies provide various options for TNPL, these are largely based on:
Credit limit
Interest rates
Repayment tenures
Start of repayment date
Travel expenses (variable)
Note: There are as many options as there are players in the travel market.
Take note of EMI and Interest Rates
The customers get the option of no-cost EMI if they can repay the amount within a specified time as mentioned by the travel agency. Some provide a 6-month duration while for many it could be shorter than that (3-4 months). With such a small window for repayment, you have to comply to avoid incurring any interest.
As for the option for the repayment of EMI, it may be within a month of the booking date (15 days), some agencies allow you to first complete your trip and then start the EMI.
Note: There could be a penalty if you default on the EMI repayment which in turn could also affect your credit score.
The interest rate levied by travel companies varies from platform to platform and typically ranges from 1-2.5 per cent per month to 12-30 per cent annually. The repayment tenure can vary from 15 days to a total repayment term of 18 months.
What are the limitations of Travel Now Pay Later?
The credit size offered for TNPL differs from platform to platform. The range of credit will depend on your income (at the time of booking), credit score (CBIL score), and repayment ability.
The average transaction limit for travel as extended by the TNPL schemes ranges from as low as 10,000 to 4 Lakh.
You can take the loan for both domestic and international trips and associated costs such as flight and hotel bookings, in addition to other travel activities. Some travel companies may have limitations for such travel-associated bookings (hotel, sightseeing, etc.). The companies will also typically require you to undergo e-KYC, with identity and address proof, as well as credit score.
Should you opt for TNPL?
Go for the TNPL scheme if:
You can avail of no-cost EMI and repay within 1 to 6 months.
Get bigger discounts from the chosen travel company, agency, lender
Need to travel in case of emergency and have no cash at hand to fund it
You are sure of your income source and loan repayment post-travel
Important to take note of:
Interest rates in case you defer repayment on no-cost EMI
Deposit cashback - In case you make a partial payment and later decide not to go on the trip, make sure to confirm if the travel company has any refund policy or not
Any additional fees or penalties against cancellations or alterations to the travel plan
Opting for TNPL is an individual choice. Since travel is considered a discretionary expense, you could better pre-plan and save for the trip than pay interest on the travel cost in case you end up deferring on EMI.
