All of us dream of taking our family for an exotic vacation. This dream is one of most sought after as it takes out all the fat out of your wallet. The trend of going abroad for a vacation has made matters even worse. It works out to be quite an expensive affair. But due to peer pressure and false perceptions, individuals do fall into the trap of taking a Personal loan to fulfil the vacation dream.
Well, does it really make any sense to take a personal loan for vacations? No. It’s a clear cut answer. There are no ifs and buts here. Studies and data show that the interest rates levied on personal loan are exorbitant. Don’t just look at the EMI portion alone because that will give you a national comfort that it is manageable on a monthly basis. But look at the extra amount you would be paying. There are a lot of other disadvantages associated with personal loans.
Since you would be paying monthly EMI to repay your personal loan, your ability to take other loans like home loan etc. will suffer badly. As you would have already exceeded the limit of EMI to Income. Personal loan for vacation will surely meet your short-term pleasures and desires, but in the long term you pay a whopping 15-25% interest on the loan, and then you ask yourself was it all worth? Personal loan is one of the most expensive forms of lending, any other loan is cheaper and would not burden your living expenses later. One of the most important reasons why people prefer personal loan is that it is easily available, you keep receiving these calls once in every few days and then you think why not????
Credit cards and personal loans are almost on the same list, they are both convenient to get and they should both be labeled “stay away from”. Both these products are marketed heavily and because they need minimal documentation, people tend to fall for it. Youth today, make online purchases, failing to realize how much they spend; though these loans may seem easy to fulfil short term gratification, they are not really rosy in the future.
Below are few solutions that one might consider instead of applying for a personal loan:
- Borrow: Get borrow from friends and extended family, when will you use these people otherwise. Ask them how much they can comfortably lend you and specify the return period clearly. Well, friends can lend you money at zero percent interest rate, so you go on a relaxed vacation and pay him/her once your back.
- Assets: You can always take a loan against some assets that you might have. Even if it is gold (like in the movies, gold always works when you are in trouble), it turns out cheaper than the personal loan. The only problem is that the loan against assets is not given on the market value of the asset, but it is still ok.
If the above solutions do not work well for you, you should probably forget the vacation, for now, save for another year and then go for an unperturbed and relaxed vacation the next time.