Is Travel Now, Pay Later a Smart Way to Finance Trip

After two years of isolation and numerous trip cancellations, you might be wanting to de-stress by taking a short vacation. In fact, it’s not just you who is itching to travel again! The travel industry across India is quickly catching up to pre-pandemic levels of activity. Whether an adventurous trip to Ladakh or a sun bath on Goa’s beaches, the visitor traffic is high everywhere.

As a result of the growing demand, many financial institutions have introduced a travel now, pay later option to make travel and leisure activities more accessible. So, if you are planning your next trip, you should learn everything about this product and how it can help your travels become more memorable
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What is Travel Now Pay Later finance?

Travel now, pay later is a kind of buy now, pay later (BNPL) financing scheme that allows you to pay for your travel-related reservations without having to incur anything out-of-pocket. If paid within the specified time frame, most  loans have a no cost EMI option. However, if you miss a payment, the lender will charge you an interest on the principal amount.
 

How does Travel Now Pay Later financing work?

 
The travel now, pay later is available from a variety of financial institutions. In this type of financing scheme, the disbursements are broken down into small amounts and divided into a series of payments. You must make the first payment when you check out of the hotel.
 
Financial institutions that provide this loan have tied-up with various hotels, airlines, restaurant chains, and a few more travel facilitators. The collaboration enables these partners to offer the BNPL service on their websites.
 
Let's understand the specifics of this scheme with the help of an example.
 
Assume you want to book your trip through a travel agency named XYZ Tours Ltd. The company has partnered with a few financial institutions to offer travel now, pay later. When you choose this option, you will be required to pay the availed funds over a set period at a fixed annual percentage rate (APR), which includes an interest component and various charges. Once your booking is complete, you can set off on your trip without paying anything to XYZ Tours Ltd. The payment cycle starts only after you have completed the trip.

Are travel loans a good idea?

 
The answer is entirely dependent on your personal circumstances and financial situation. However, the following pointers can guide you in deciding whether to avail the travel now, pay later schemes.
 

When should you opt for Travel Now, Pay Later?
 

1. Zero Percent APR Loan

   Applying for this loan is ideal if you qualify for a zero percent APR offer. The lender or your travel partner will provide you with such an offer if you have a strong credit profile. For example, if you are  regular on your credit card payments and have never skipped any previous loan EMIs, you may easily qualify for such a lucrative offer.
    

2. Emergency Situations

   There may be times when you need to travel immediately. Some of these situations include a relative's funeral, a medical emergency, and so on. Assume you have been diagnosed with a disease that necessitates treatment in another country. Would you prefer depleting your emergency funds for paying for your flight bookings and lodging or would you prefer paying it for your treatment? Using a travel now, pay later scheme would be the better option in this case.
    

3. You have backup funds

   No financial product is free. You must pay some amount, either in the form of interest or transaction fees, to obtain the benefits. The same is true for pay now, travel later financing. If you have backup funds, then you can easily pay off the loan on time without incurring any penalty or interest.
    

Alternatives to Travel Now, Pay Later

 
There are numerous financing options available to assist you in planning your vacation. The two most common ones are listed below.
 

1. Personal Loans:

   Personal loans are the best alternative to travel now, pay later financing. When you apply for this loan, the lender digs into various things. They look at your credit score, business finances, employer credibility, monthly income, and other factors to determine your repayment capacity. If everything is found to be satisfactory, you could receive up to Rs 5 lakh loan easily without any collateral. 
    

2. Credit Card

   When it comes to travelling, credit cards are one of the most used loan products. When you apply for this loan, the lender does not charge you any interest rate right away and gives you a deadline by which you can repay the loan without paying any additional amount.
    

Also Read: Personal Loan or Credit Card Which one would you go for
 

To Conclude

 
Travel now, pay later options have made travel and leisure activities more accessible for people on a limited budget. However, it is important that you do not overindulge in luxury on trips financed through this option. In addition, you must carefully read and understand the terms and conditions for these loans and enquire about any hidden charges. Also assess your current finances because any delay in EMI payment can result in a higher interest and negatively affect your credit score.