Personal loans: Raising money for vacation needs THIS checklist | Mint

Personal loan: If you have a domestic or overseas travel lined up and are short of funds – you may have a temptation to take out a personal loan for the same.

Although fundamentally it is not a complete no-no, it is subject to some checks and balances. Let us understand more on this.

Suppose you have a plan to go to Goa with your childhood friends which was made at the drop of a hat. You have recently run out of money because you bought a car recently.

You can easily save enough money in the next two to three months for this Goa trip but the trip is scheduled for the first week of next month. In this situation, it is not completely unreasonable to take a personal loan.

Similarly, your former colleagues from your previous employment are going to Vietnam which will cost each participant around ₹one lakh. This is a good networking opportunity but you don’t want to exhaust the little bank balance that you have.

There is a temptation to raise a personal loan in this scenario. And it is alright in view of the specifics of this case. These are some of the circumstances in which taking out a personal loan is not irrational.

Personal loan: Alright to take it for travel

I. When waiting to save money is not an option for you. You are meant to go on this trip necessarily in the immediate future because the plan was made months in advance.

II. When it is not merely a trip but has professional benefits attached such as massive networking.

III. When it is a once-in-a-lifetime kind of vacation for you or for your family.

IV. When the rate of interest is quite affordable for you and will not lead to a heavy interest burden.

V. When the loan amount is quite less, say ₹1-2 lakh and you plan to repay the money within a few months or perhaps within one year.

Avoid taking loan for travel in these scenarios

I. When the travel can be postponed till the time you will be able to accumulate enough funds.

II. When the interest rate is exorbitant.

III. When the loan amount is far more than your monthly income. For someone earning ₹2 lakh a month– a personal loan of ₹2.5 lakh is not a big amount unlike someone with a monthly income of ₹40,000.

(Note: Raising a loan comes with its own risks. So, due caution is advised)