As you plan to swap work emails for boarding passes and suitcase wheels, it’s equally important to plan how you intend to finance the trip. A personal loan can offer convenient, fast access to funds, but only if it aligns with your financial health.
While India’s retail personal loan segment has expanded rapidly in recent years, concerns around over-borrowing and rising repayment pressure have also intensified. Data reveals that the personal loan gross non-performing asset (GNPA) ratio climbed from 1.03% in March 2024 to 1.18% in March 2025.
To ensure your vacation ends with happy memories rather than financial regret, here are five crucial questions to ask before taking a personal loan for travel.
1. What Is the True Cost of the Loan?
Most borrowers focus only on the monthly EMI and how it enables them to take the trip immediately. However, the total cost of the loan depends on the interest rate, tenure, and additional fees.
Many Indian lenders offer personal loans starting at 9.99% per annum, but your actual rate may be higher depending on your credit score, income profile, or shorter repayment tenure.
Don’t forget to evaluate other charges such as processing fees, service taxes, and pre-payment penalties. A clear picture of how much you will ultimately repay — long after your vacation ends — is essential for making a responsible choice.
2. Can You Afford the EMI Without Sacrificing Other Goals?
Using a loan to fund your holiday adds another fixed expense to your monthly financial commitments. Ideally, your total EMIs should not exceed 30–40% of your take-home pay. Exceeding this limit increases vulnerability if your income drops or unexpected expenses arise.
Even the Reserve Bank of India notes that the growth of “other personal loans” has slowed, showing borrowers are becoming more selective.
review whether your monthly budget can comfortably absorb the EMI while still covering essentials, emergency savings, retirement contributions, and other financial priorities. If repaying the loan means compromising critical goals, the vacation may bring a financial hangover instead of joy.
3. Is It Wise to Borrow for a Consumption-Based Expense?
Travel enriches your mind and soul, but financing it with a loan requires using future income to pay for present consumption. Unlike an education or business loan — which generates long-term value — a travel loan offers no financial return.
Experts have pointed out increasing stress in unsecured retail lending. This makes it crucial to examine whether you would still have taken the trip if a loan wasn’t available.
If the loan simply helps with timing and you can repay it easily, it may be acceptable. But if it forces long-term repayment for short-lived leisure, it’s better to reassess.
4. What If Something Goes Wrong After the Trip?
Life is unpredictable — job changes, medical emergencies, or sudden family responsibilities can hit anytime. Loan EMIs, however, remain constant regardless of your situation.
Industry data shows that unsecured personal loans carry higher default risk. So before signing up, consider how your finances would look if your income dropped or your expenses unexpectedly increased.
Choosing a shorter tenure or building a financial buffer can reduce stress later. Avoid letting temporary excitement turn into long-term financial strain.
5. Have You Explored Alternatives to Borrowing?
A personal loan is just one option — not the only one. Before borrowing, consider:
- Using existing travel savings
- Choosing a more affordable destination
- Splitting your trip into phases
- Finding seasonal deals or discounted travel packages
India’s personal loan market is expected to keep expanding, but borrowing should always be intentional. A loan should be a financial tool, not a fallback.
If you still decide to go ahead after evaluating these five questions, ensure you have a solid repayment plan and an emergency cushion. Let your travel plans lift you into a world of leisure — not a cycle of stress.
When you return home financially secure, the memories last longer. If your answers give you confidence, a personal loan might work for you. If not, consider postponing or resizing your vacation until your finances align. Your holiday should feel rewarding, not burdensome.
(Disclaimer: This article has been authored by Rishabh Goel, Founder and CEO, Credgenics. The views expressed are personal.)
For breaking news and live news updates, like us on Facebook or follow us on Twitter and Instagram. Read more on Latest Personal Finance on thefoxdaily.com.
COMMENTS 0