Have you ever found yourself lost in a sea of mesmerizing pictures, daydreaming about strolling hand-in-hand with your loved one in front of the Eiffel Tower? Or perhaps you've saved countless Instagram posts from travel influencers, hoping that one day you'll have the chance to explore those breath-taking destinations yourself.
We all have our dream vacations, but let's face the bitter truth: traveling abroad comes with a hefty price tag. In this captivating blog post, we'll delve into the art of planning, budgeting, and funding your ultimate getaway.
Planning Your Dream Vacation:
The first step on your journey is to choose your destination. Whether you're a beach lover or a mountain enthusiast, explore places that align with your interests—Bali, the Maldives, Himachal, or Nepal, for example.
However, if your heart yearns for destinations beyond Asia, be prepared to allocate extra funds or consider a travel loan. Thankfully, there are several reputable travel agencies that offer cheap foreign trips. So, take your time, do your research, and fix the destination that ignites your wanderlust.
Budgeting a Vacation:
Budgeting and destination selection go hand in hand. You must consider the affordability of the trip when making your decision. Once you've chosen your dream destination, it's time to determine your expenses.
Calculate costs such as airfare, accommodation, food, shopping, and transportation, based on your income and ability to save. Remember, budgeting should ideally be done at least a year in advance if you're not planning to take a travel loan.
Saving Money for Travel:
Even a week-long trip to Bali can cost a family of three approximately 2 to 3 lakhs. So, strategizing ways to fund your vacation becomes vital. One option is to save money specifically for travel.
Set aside a portion of your monthly salary, putting it in a savings account or fixed deposit where you won't be tempted to spend it. If multiple members of your household are working, encourage everyone to contribute. However, this requires pre-planning and cutting back on personal and household expenses.
Despite saving diligently for a year, you might still find yourself a few thousand rupees short. Moreover, some may perceive using a significant portion of their savings on a single plan as a poor financial decision. In order to avoid these, let us delve into the financial planning part of your travel:
Take a Travel Loan:
An easier and more common option to finance your dream getaway is to take a personal loan for travel. Many banks and NBFCs offer instant personal loans based on your credit score, salary, and repayment ability. Personal loans are unsecured, meaning you don't need to pledge any assets. Instead, your income serves as a surety for the loan. People often prefer personal loans for family vacations due to their easy online application processes, flexible loan amounts, and tenure options. However, it's essential to be mindful of the high-interest rates associated with personal loans.
SIP your way to your Vacation:
The beauty of Systematic Investment Plans (SIPs) is that they allow you to tap into your funds and save on those extra expenses, even for unplanned getaways. Let's explore how SIPs can help minimize the impact on your savings.
Let's consider an example. The cost of a 4-night/5-day tour to Hong Kong for a couple, including airfare, is approximately Rs. 1,00,000. If you opt for a monthly SIP investment of around Rs. 8,000 for a year, you can allocate the necessary funds for the trip. It is advisable to invest in a financially stable and liquid fund with an expected return of around 7% for short-term requirements.
On the other hand, if you plan a vacation two years from now, you can reduce your monthly SIP investment to half, i.e., Rs. 4,000. As the investment period lengthens, the required monthly investment decreases. With the power of compounding, your tour amount will reach Rs. 100,000 after one year, providing you with a concrete amount for your trip.
Vacation Now, Pay Later:
To make travel more accessible, popular travel aggregators like MakeMyTrip and Expedia have introduced a convenient financing option called "Vacation Now, Pay Later." This service allows customers to book their holidays without an immediate payment at the time of checkout.
Under the Vacation Now, Pay Later program, digital credit is provided by the partner bank or non-banking finance company (NBFC) associated with the travel aggregator. The annual interest rates for these loans typically range from 13% to 30%, and the repayment tenure can extend up to 18 months. It's important to note that repayment begins a month after the booking is made, even if the vacation is scheduled for a later date.
While the name suggests that the loan is repaid after the vacation, some aggregators may offer zero interest rates if the full repayment is made within 15 days of availing the credit. However, failing to make the monthly instalments on time can attract a penalty of 2-3% monthly interest or a flat late payment fee for each default.
Additionally, it's advisable to check the terms and conditions regarding loan cancellation in case your trip is cancelled. Some aggregators may allow loan cancellation, while others may impose an extra fee for such cancellations.
Planning, budgeting, and funding your dream vacation require careful consideration and financial discipline. Whether you choose to save money or opt for a travel loan, it's important to weigh the pros and cons and select the option that suits your financial situation best. So, pack your bags, embark on your adventure, and create lifelong memories without worrying about the financial aspect of your dream vacation.
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