Sai Swaroop, 28, a supply chain management professional in Chennai and father of two, is on a long-dreamt-of solo Europe trip, with a 23-day spin to France, Switzerland, Croatia, Hungary, the Netherlands… Helping him with the financial logistics of a budget trip is a ₹1.5 lakh loan from IDFC.
Swaroop is among the growing number of young Indians taking personal loans, or curated holiday loans, to satisfy their wanderlust. In many cases, the loan amount is a safety cushion that enhances the full experience of a destination. Some feel a holiday loan inculcates in them the discipline to travel, which is otherwise considered a luxury. The logic seems to be to plan a holiday loan the way you plan your investment.
This is something the now-famous Kochi couple Vijayan, 68, and Mohana, 66, have been doing for years. They have visited over 20 countries, including Singapore, Switzerland and the US, saving money from their coffee stall business and topping it up with a loan. Upon repayment, the next destination is chosen.
Swaroop availed the loan in October 2018, and plans to start paying it back once home. “I had saved money but wanted some buffer. I got the loan at 10.99% interest and there is no penalty on early repayment.”
These loans seem hugely popular among solo travellers, who head out on a budget. “This loan is a godsend because it allows me to go on a holiday, even though I have family and financial commitments,” says Swaroop, whose wife is not particularly fond of travelling.
Karnekota Srikanth, who is into cloud computing, first took a loan from a friend in 2015 for a week-long trip to Shirdi, Nashik, Triambakeshwar and other parts of Maharashtra. “Later, I took loans from banks to suit my travel needs.” Srikanth says he usually looks at external funding for travel, but always repays it the quarter after borrowing money. “This is how I’ve chosen to lead my life; these travel experiences are priceless.”
Recognising this emerging market, travel companies have started tying up with financial institutions to offer customised unsecured loans. Karan Anand, head, Relationships, Cox & Kings, says, “The trend of multiple holidays in a year is growing, and upwardly mobile individuals with a good credit track record avail of holiday loans. Between 5% and 7% of our customers opt for these — of which millennials comprise 40% — and this segment is poised for growth.”
Cox & Kings has tied up with SBI, IndusInd Bank and Bajaj Finserv. Says Anand: “When people take a holiday loan, they can spread that expenditure over a year or two. The logic is that it’s better to take a loan for the bigger holidays, where the ticket cost is over ₹1 lakh.”
Daniel D'Souza, head, president and country head, leisure, SOTC Travel, feels the emergence of credit culture and easier availability of personal loans has driven growth for the travel and tourism industry. “The new-age traveller is keen to explore the world, and we have seen a significant rise in the travel loan segment.”
Financial tech startup IndiaLends estimates that personal finance constitutes between 15% and 20% of the total loan portfolio. Gaurav Chopra, founder-CEO, puts this down to “the emergence of ‘leisure consciousness’ across India’s younger generation and the realisation that a balanced lifestyle is important”.
- Borrow sensibly, keeping in mind repayment ability.
- Draw up a budget for travel and accommodation.
- For leisure, choose activities of your interest that are also specific to the destination.
- Compare lender details and interest rates and opt for a scheme that fits your requirement.
- The most commonly visited places on a holiday loan are Singapore, Thailand and Malaysia in Southeast Asia and European destinations such as the UK, France, Switzerland and Germany.
So, who takes these loans? “Not just those who don’t have money, but also those who want better travel experiences or wish to visit finer destinations. Millennials form our core target group. Given the holiday season, we have seen an increase of 55% in loan applications for travel purposes, 85% of whom are millennials,” says Chopra, adding, “Since our customers take loans for last-minute holiday plans, they opt for countries offering visa on arrival. These include Thailand, Dubai, Sri Lanka, Indonesia, Nepal, Maldives, Bali and Bhutan. But, there are also customers taking loans for luxury holidays to Europe, the US, South Africa, Australia and New Zealand.”
Speaking about the genesis of Axis Bank’s holiday loan portfolio, Jagdeep Mallareddy, head, Retail Lending, says, “We started holiday loans (from ₹50,000 to ₹15 lakh; interest rates begin at 15.5% and the repayment tenure is between 12 and 60 months) somewhere around Deepavali 2018. Some personal loan consumers do disclose that the end-use is a family holiday. When we get this kind of data, we internally look at segments that are emerging, and see if there’s merit in creating a tailor-made solution.”
But, how does this score over a personal loan? “There are some advantages. The first instalment begins only after 60 days. People normally stretch themselves on a holiday; this gives time to get back to a payment schedule. We also give them a complimentary multi-currency travel card,” he adds.
What these loans do is ensure that lack of savings is never an impediment in allowing oneself the luxury of the experiences that a holiday offers.