Although the world’s most famous travel destinations offer a variety of different experiences, they all have one thing in common – the need for money as a prerequisite for travelling. Even if you’re planning to travel to a nearby destination, you’ll still need enough money to cover travel, food, and accommodation expenses.
If you don’t have enough savings, you probably have two options in mind to meet such expenses – take a travel loan or use your credit card. But which among the two options is the best? This article will cover all you need to know to make an informed decision between loans and credit cards while travelling.
What Is a Travel Loan?
Travel loans are just like any other personal loan. You can borrow a specific amount of money from a financial institution and repay it over a specified period of time. There will also be a fixed interest rate on the amount you borrow. Along with financing your vacation, travel loans can also be used to buy travel accessories. You can apply for the travel loan here: https://www.fullertonindia.com/personal-loan-for-holiday.aspx
- Personal loan interest rates are significantly lower as compared to credit cards.
- As there is a fixed interest rate, you can effortlessly make a budget for repayment, all while keeping your financial goals in mind.
- If you are keen to place an asset as collateral, you can borrow a significant amount – which is not possible in the case of credit cards.
- It doesn’t have any additional benefits or a reward system like credit cards.
- Interest rate is charged for the entire amount as soon as you take out the loan.
- If you have a bad credit history, the interest rate will be higher, or your loan application will be rejected.
What Is a Credit Card?
Credit cards come with an approved amount limit, and you can spend within that limit as you wish. Not all individuals are eligible for a credit card. As it is an unsecured form of lending, you must have an outstanding credit score and repayment history to avail one. For those with a low credit score, credit cards are useful to build up their credit profile.
- Even though you have an approved credit limit, you only have to pay interest for the amount you use.
- Ideal to borrow small amounts over a period of time.
- Depending on your lender, avail reward points, travel insurance, and more.
- If you pay off the entire sum before the next instalment date, you won’t be charged any interest.
- Credit cards come with a higher interest rate as compared to personal loans.
- With credit cards, you may be tempted to overspend.
- You may have to pay high charges for ATM withdrawals.
- Foreign exchange fees will be higher for some cards.
- Some credit cards have annual fees.
As you can see, deciding between a personal loan or a credit card for travelling is entirely dependent on your travel needs and repayment preferences. If you want a lump sum amount to finance your overseas adventure and wish to repay it over a period of years, then a personal loan will be a better choice.
On the other hand, if you desire the flexibility of pay as you go and want to take advantage of added features like travel insurance or reward points, then a credit card is a better option.
While taking out a loan or applying for a credit card, ensure you look into your current financial status to assess your repayment capability. The key is to take advantage of loans and credit cards only when you really need them and not because they are approved. Visit the lender’s website to know more about the best financial options available for making the most out of your long-awaited vacation.