As the Indian economy continues to evolve and grow, the travel theme is gaining traction. The aspiration to visit new places and travel with joy is becoming an integral part of life for many Indians. Now, to meet such aspirations quickly and seamlessly, more and more people are applying for personal loans and opening up credit lines.
However, it is extremely important to pause and consider the pros and cons of such personal loans before blindly falling for them. Below, we explore the merits and demerits of travel loans in detail.
What are the pros of personal loans for travel?
- Easy availability of money
Personal loans for travel are easily available through banks and non-banking financial institutions (NBFCs) such as HDFC Bank, ICICI Bank, and Bajaj Finance. These loans often require minimal to no paperwork and have a smooth approval process. Now, as of early 2025, personal loans for travel purposes can be processed online through leading banks within hours. This makes them extremely attractive for completely random and unplanned travel ideas. - Flexible repayment options
Now, most lenders provide flexible and easier repayment terms for personal loans. The repayment period ranges from three to five years, which allows borrowers to manage their financial health more effectively by distributing their travel and holiday expenses over several months and years. This also offers much-needed respite in difficult financial situations. - Much lower interest rates compared to credit cards
Personal loans generally come with reasonably high interest rates. These rates can be higher than secured loans. Still, they are generally lower than those related to credit cards. This makes these loans a more cost-friendly solution for covering travelling expenses. - Assists and helps in building credit scores
Time-bound and consistent repayment of personal loans can impact your credit score in an immensely positive manner. A good credit history and a reasonable credit profile can help you secure better interest rates on any loans you apply for in the future, thus making it a strategic move for your financial prosperity. - No need for collateral or pledging any asset
Secured loans generally need collateral. Personal loans, on the other hand, do not require borrowers to provide collateral or pledge any assets such as gold, equities or property. This makes them more feasible to a broader range of applicants including professionals who may not have any assets to pledge or provide for covering for the loans as security.
What are the cons of personal loans for travel?
- Very high interest rates, strict repayment terms
It is a given that personal loan interest rates are lower than those imposed on credit card users. However, they can still carry very high interest rates and very challenging repayment terms, especially for those who have poor or imperfect credit scores. This can shoot up the overall cost of your trip significantly. - Processing fees and additional charges
Lenders and financial institutions charge prepayment penalties and processing fees among other associated charges. Such charges can add to the financial burden on your travel expenses. That is why it is prudent to always carefully read the loan fine print before committing to any particular loan agreement. - Serious risk of overleveraging
The ease of obtaining a personal loan can easily lead some borrowers to take more than they need or actually need or aspire to have. This can easily result in financial difficulties if unexpected costs arise during the trip and hence come along with a serious risk of overleveraging. - Negative implication for future borrowing capacity
Your debt-to-income ratio will be negatively impacted if you go for more debt. This may hamper your ability to get more loans in the future. This is immensely crucial for individuals planning significant purchases like homes, cars, or land, in addition to their travel trips or vacation ideas. - Possibility of debt accumulation
Frequent dependence on personal loans for travel can result in a cycle of debt. It creates a situation where borrowers continuously take new loans to repay the old ones. Such a situation can easily result in financial chaos and mismanagement if not handled in a professional way. Personal loan interest over interest due to late or non-payment can really escalate the overall loan amount and have serious legal ramifications as well.
Current personal loan interest rates from leading banks
As of April 2025, several major banks in India offer lucrative personal loan interest rates. SBI, for example, provides rates between 10.30 per cent and 15.30 per cent. On an individual level, these rates depend on the creditworthiness, credit profile and repayment capacity of a person along with the total loan amount.
Further, HDFC Bank provides loans starting from 10.90 per cent, whereas Axis Bank’s rates range from 11.25 per cent to 22 per cent based on individual profiles. Lastly, ICICI Bank provides interest rates from 10.85 per cent to 16.65 per cent, ensuring flexibility in repayment.
Note: The interest rates discussed in this article are indicative in nature only. For the most recent updates, terms and interest rates applicable reach out to your respective financial institution.
Personal loans are convenient and a highly sought-after tool for travel. Still, it is immensely important to carefully consider the advantages and disadvantages before applying for them.
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