Have you been feeling sad or stressed lately, maybe because of work or personal issues? A good solution could be taking a break and going on a trip.

However, not everyone has a lot of money saved up for unplanned vacations. That’s where options like ‘Travel Now, Pay Later’ can be helpful. But is it a good idea? Let’s explore

What is Travel Now Pay Later?

Essentially, it’s a method that allows you to take a loan or credit for booking a trip. You can pay this loan in the form of EMIs.

Online travel aggregators and travel firms collaborate with banks, fintech companies, or provide credit through their fintech departments. 

The financing options include no-cost EMIs or an interest rate on the borrowed amount, determined by the amount and loan duration. Travel platforms like MakeMyTrip, Expedia, and Yatra have started providing this option to their visitors.

The real picture behind travel now pay later

The travel now pay later option isn’t as simple as it seems because it isn’t a standardised feature.

While a no-cost EMI seems like the best-case scenario, different platforms have different durations for eligibility, mostly ranging from 3-6 months. 

Post that, the annual interest rate on these loans can range anywhere between 12% and 30%. 

The commencement of EMI varies too, with some starting within a month of booking, while others allow post-trip initiation. 

And yes, defaulting on EMIs incurs penalties and negatively affects credit scores.

It is important to note that not all aggregators permit credit for every trip expense. Some restrict it to specific packages, while others exclude flight bookings or visa fees from pay later options. 

Also, another thing you must ensure is that your aggregator allows loan removal for any last-minute trip cancellations and if there are any penalties involved in that. 

Also Read: Travelling abroad to Japan, Thailand, Taiwan? Avail these incentives to save more

Should you go for it?

Ideally, it is better to have a separate liquid travel fund ready wherein you put a small amount aside every month. For example, a sweep-in FD is a decent option.

Moreover, a personal loan with a rate below 12% and longer repayment tenure could be more cost-effective, with lower EMI default penalties. 

Credit cards offer a 30-45 day interest-free period, slightly shorter than TNPL’s no-cost EMI window. 

However, converting credit card bills to EMIs at 12-18% may be cheaper. 

Sometimes, platforms provide crazy deals if you opt for the credit option, in that case, you can evaluate and see if TNPL is better.

Overall, TNPL is a better choice only if you are going for no-cost EMI, quick repayment, or emergency travel. 

Disclaimer: The above content is for informational purposes only.