Travelling is an experience that many people look forward to. After all, it allows you to explore new cultures and broaden your horizons. As travelling comes with its own set of expenses, recent years have seen the boom of ‘Travel Now, Pay Later' (TNPL) loans.
It is essentially the ‘buy now, pay later' meant for the customers and companies in the travel and tourism sector.
Tourism companies offer these loans in partnership with banks and fintech companies. While these loans are highly appealing, you need to be aware of their pros and cons before taking them. Here's an explanation of how they work and whether you should opt for them.
What is Travel Now Pay Later?
Travel Now, Pay Later is a payment model where travellers can book flights, hotels, or holiday packages and pay the amount within a pre-defined period. The TNPL service providers may charge interest and additional fees if you fail to pay off the amount within the deadline.
Basically, this works like a short-term loan and you will be charged interest only for the amount you utilised.
Several travel platforms, banks, and Non-Banking Financial Companies (NBFCs) provide such short-term loans for travelling nowadays.
Advantages Of Travel Now Pay Later
Affordability: Several no-cost EMI options are available for getting TNPL loans. This makes it accessible for families and individuals who may not have large savings.
Accessibility: TNPL loans are usually easy to get and do not require much paperwork. This makes it highly accessible.
Wide Range Of Options: From budget domestic trips to luxury international packages, TNPL is available across price ranges, catering to diverse categories of Indian travellers.
Disadvantages Of Travel Now Pay Later
Hidden Costs: Not all TNPL plans are interest-free. Some banks and non-banking financial companies (NBFCs) offering the service may charge high interest rates or processing fees, increasing the trip's overall cost. If repayments are delayed, it can lead to high interest rates.
Debt Trap Risk: Easy access to credit may lead to overspending. Missing EMIs can lead to penalties and damage your credit score.
Credit Dependency: Over-reliance on TNPL can create a habit of living beyond one's means. It can lead to financial ruin in the long run.
To conclude, it is very important to study the terms and conditions of a TNPL loan before opting for it. While it can give you easy access to funds, missing your repayment once can lead to a serious financial burden. To fund your trip, you can also explore options such as investing in mutual funds and fixed deposits, and increasing your monthly savings.
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