a SIP in a liquid or debt mutual
fund. Set an auto debit instruction
with your bank on the very next
day after you get your salary. This
will ensure that you don’t end up
spending your salary on other
things,” says ER Ashok Kumar,
CEO and co-founder, Scripbox. He
recommends debt and liquid funds
as they offer higher rates of return
and are not subject to market
volatility unlike equity funds.
Mathpal is in favour starting
even earlier. “Since most clients
aspire for international travel, our
advice to them is to save five years
in advance in equity funds. If your
travel is a year away, you will have
to start investing in a liquid fund or
a fixed deposit. You could also look
at savings accounts with banks that
offer higher rates of interest, often
up to seven per cent,” he says.
Insurance Is Indispensable
Savings apart, you also need to put
in place a fall-back option in case
of emergencies. Certain countries,
like those in the Schengen region,
insist on travel insurance before
they issue a visa, but you must buy
a policy even if your destination
country does not insist on one.
Remember, your regular health
insurance policy will not cover any
expenses incurred abroad.
An adequate travel insurance
cover can absorb hassles that can
ruin an otherwise great holiday.
Not only can it take care of your
hospitalisation expenses (if any)
while you are abroad, it can also
compensate for flight cancellations
and lost baggage – niggles that you
often forget to factor in while on a
holiday. By insulating your savings
against emergencies, you can
prevent a slide into a debt trap.
On Borrowed Wings
Non-banking financial companies
(NBFCs) and loan aggregation
portals often promote travel loans
If You Take A Personal Loan*...
Maximum loan amount
Processing Charges
Rate of interest
Loan tenure
Key documents needed
`30 lakh
0-2%
10.99-19.99%
1-6 years
KYC, income proof, bank statements#
Source: Bankbazaar.com; *Travel loans are treated as personal loans; # Apart from these, you may be required
to furnish details of your trip such as air fare, accommodation bookings and travel plans. Some banks ask for this
information and you should have the documents ready in case your lender demands to see the expected expenses.
during the vacation season, with
some promising to sanction loans
within just 30 minutes. While it is
tempting to avail of a loan if you
are falling short of funds, it’s best
avoided. “Travelling is an optional
or discretionary expense, so try to
avoid loans or high-interest holiday
loans,” advises Rasal.
These loans are essentially
unsecured, which means the rate
of interest could be as high as 18
per cent. “If you’re sure you want
a loan, do note that you will be
charged an exorbitant interest on a
personal loan. On the other hand,
if you were to save in mutual funds
through a SIP, the money you invest
Planning For A Stress-
Free Holiday
1. Start an SIP dedicated to your
travel goal at least 12 months
in advance
2. Set aside this amount in a
fixed deposit or a liquid fund
3. Use your credit card to make
good any shortfall in funds
only if you are confident
of repaying it during the
interest -free credit period
4. Taking a travel loan to fund
your holiday should be the
last resort
5. If you use credit facilities,
make sure that you repay on
time to avoid unfavourable
credit scores
would yield results and become
a source of passive income, not a
liability,” says Kumar. A credit card
is a better option if the shortfall is
small and you can clear the dues
the following month.
“Loans should be the last resort.
Travel loans are not different from
personal loans – the rate of interest
can be as high as 10.99 to 18 per
cent,” says Navin Chandani, chief
business development officer,
Bankbazaar.com. The repayment
period could range from one to six
years, depending on the lender and
the loan amount.
Be it travel loan or credit card,
use funds sparingly. Ensure that
you pay off your credit card dues in
time to avoid paying high interests
– often as high as 39-44 per cent.
Also use a prepaid forex card
instead of your credit card to shop
and make withdrawals. “Holidays
are a great time to spend and have
fun, so you should be especially
careful to avoid binge spending
and piling up dues on your credit
card,” says Patanjali Somayaji,
co-founder and CEO of Walnut, a
budgeting app.
Draw up a budget and stick to it
by cutting out big-ticket impulse
purchases. “Many of our younger
clients are not fully aware of the
implications of an unfavourable
credit score. Impulse spending can
not only get you into a debt trap,
but also affect your credit score,”
Somayaji cautions.
[email protected]
www.outlookmoney.com April 2018 Outlook Money
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