It is recommended that one should save for their upcoming trips. However, there are instances when one of your family members or friends make plans instantly, and you get yourself in a situation where only credit can help you take the vacation. If one is running on a limited disposable income, then it might not be a wise thing to take out your savings for the much-needed travel trip you are planning. Instead, you can take the credit. However, whether to avail of a personal loan or pay for expenses with your credit card is a question that we will be answering below in this article.
Compare interest rate between credit card and personal loan
A personal loan or Travel loan in this context is usually cheaper compared to spending via Credit card. For instance, tata capital personal loan interest rates start from 10.99% p.a. depending on the monthly income, loan amount, etc., and most of the lenders have the annual interest rate on a credit card comes out to around 36%. Choosing credit cards over a personal loan has the advantage of availing interest-free loan provided the loan amount is repaid by the due date or else carrying an outstanding balance can lead you to pay charges up to 47% p.a. And in case you choose to convert the entire due into EMIs, then it could further cost you 12% to 25% p.a. coupled with the processing charges of up to 3%. This is where availing of a personal loan from Tata capital Personal loan, for instance, outscores credit cards as their processing charges come down to 2.75%.
Tenure and Loan amount
With credit cards available in India, you can manage all your travel expenses at 0% interest for the first 40-45 days. So, if you are sure with your current income and salary you can pay off the entire balance within your designated billing cycle, then credit card payment mode is for you. Mind you, the interest rate charged after the initial period can be pretty high if compared with a personal loan. If you are looking for flexibility in paying the loan amount, then a personal loan is for you. For example, a travel loan or a personal loan from Tata capital loan has a tenure of 12 months to up to 6 years, and with tata capital personal loan interest rates starting from 10.99%, you can make stable payments over time without worrying about paying the vacation expenses up front as in the case with a Credit card. Tata capital loan allows, that is, it doesn’t charge, prepayment of the loan if the maximum amount is 25% of the principal outstanding.
A personal loan is an easy option in case of emergency travel
If you do not have a credit card and there is emergency travel you have to go to due to business or family, then applying for either a personal loan or travel loan from the right lender, for instance, a Tata capital loan can come in handy in these times. Quick disbursal, can get a loan up to Rs. 5 lakhs Personal loan and flexible tenure are few of the benefits of availing loan from Tata capital loan. However, with a credit card, one only gets a certain limit they can spend, and if you aren’t able to pay off the debt in the interest-free period, the interest accrued on it will be more expensive than availing a personal loan.
No restriction on the usage of funds with a personal loan
Credit cardholders must be aware of the Credit utilization ratio- it is the percentage of your total credit usage concerning the available spending limit. For example, you choose to fund your vacation with your credit card, you have an available spending limit of up to Rs 1 lakh, and you have used approximately around 60k in that duration. In such a case, your credit utilization ratio would be 60%. The CUR should always be below as it reflects the cardholder’s credit managing capacity, and a higher ratio could be considered that the borrower is overspending. When you are on vacation, spending on shopping, hotel, activities will naturally follow, and CUR is the last thing you should worry yourself with. This is where an availing personal loan, for instance, from a Tata capital loan, can benefit you as once the amount is disbursed in your account, you can either choose to use it fully or save some of it.
A personal loan can save you from constant dependence on loan
Unlike credit cards, a personal loan doesn’t allow you to continuously borrow more money, thus removing the temptation of dependence on a loan. When you are on a trip with a credit card, chances are there you will spend more than the available credit, and not to forget, you will be charged an over-the-limit fee; however, with a personal loan, this is not the case. A personal loan from the right lender, for example, Tata capital loan, can keep you in check of your expenses and tata capital personal loan interest rates starting from 10.99% and long tenure ensures you can clear off the debt by making periodic payment at fixed intervals.
So, the answer to which options one should go for depends on the borrower’s needs, loan amount required, need for flexibility, and tenure. Only then one can decide which option works the best for your situation. Each bank and NBFCs offer a set of advantages for personal loans and credit cards. So, compare your needs with the benefits offered by the financial institution. For example, if you are taking a trip within India and the total estimated expenses will be anywhere around 20-40K, then a credit card will be sufficient in this situation. However, if you are going to an international destination for a vacation where expenses would run in lakhs, taking a personal loan will benefit you more. Also, not all credit cards are accepted in some countries. Travel loan from Tata capital loan comes with flexible tenures of up to 6 years where one could get a personal loan up to Rs 25 lakh.