Is “Travel Now, Pay Later” a good option for your vacation?

Planning a last-minute summer vacation but don’t have enough savings to fund the trip? Some travel aggregators, such as MakeMyTrip and Expedia, have started offering a Pay Later financing option, commonly referred to as Vacation Now, Pay Later, at the time of booking, which allows customers to book the vacation without paying for it immediately.

The Vacation Now, Pay Later service offers digital credit which is disbursed by the travel aggregator’s partner bank or non-bank financial company (NBFC). The annual interest rate on these loans can vary between 13% and 30% and the repayment term can be up to 18 months. Repayment in installments comes one month after booking, which means that contrary to the name of the loan, you won’t necessarily pay the loan back after your vacation if you book well in advance.

Some aggregators may offer you a zero interest rate for a full refund made within 15 days of taking credit. Late payments result in a penalty of 2 to 3% monthly interest or flat-rate late fees for each default.

One important thing to note with these loans is that aggregators may not extend credit on all travel-related expenses. For example, some aggregators only extend credit on packages available on their platform, while others do not allow flight bookings or visa fees through the Pay Later funding option. In the former case, you may have to compromise on your itinerary just to be able to finance your vacation.

Also check if the aggregator allows you to cancel the loan if the trip is canceled and if you will have to pay additional fees for the cancellation.

“Holidays involve cancellations, sometimes on the traveler’s side and sometimes on the airline or travel agency side, which can cause a lot of hassle for the borrower as they will have to deal not only with the aggregator but also with the lender. The experience might leave a sour taste in the mouth. Better to use a credit card,” said Amit Suri, a Delhi-based financial planner.

A travel credit card may be a better option because not only do you save on interest if you repay on time, but you also earn rewards points that can be used for flight and hotel reservations later.

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