Are you dreaming of a vacation but worried about how you will manage your finances while traveling? Opting for a travel loan could be the perfect solution to make your dream trip a reality. Moreover, leveraging your mutual funds as collateral for a traveling loan can provide an even more attractive option. In this article let us explore how you can use a travel loan and a loan against mutual funds to finance your next traveling cost while benefiting from favorable terms and conditions that come with a travel loan against mutual funds in India.
What is a Travel Loan in India?
A travel loan is a type of personal loan that is specifically designed to cover your travel-related expenses such as flight tickets, hotel bookings, tours, and other activities while you are traveling to a new place. Most of the travel loans in India that you get are unsecured, meaning you do not need to provide any collateral, and they come with flexible repayment terms.
What are the benefits of a Travel Loan In India?
1. Quick Loan Approval and Disbursal – Many times a travel plan is decided in an instant. By keeping this in mind most travel loans and loans against mutual funds in India are approved very quickly, ensuring you get the funds in time to book your trip.
2. Flexible Repayment Options – Just like Personal loans, travel loans given in India offer various repayment tenures. The range of loan tenure usually ranges from 12 to 60 months, allowing you to choose a plan that fits your requirements.
3. No Collateral Required – A travel loan is an unsecured loan and unsecured loans don’t need any collateral thus making them accessible to a broader range of individuals. If you don’t have any collateral you can go with a travel loan, but if you want to take advantage of various benefits we would suggest you go with collateral-based loans such as loans against mutual funds to get the benefits they provide. To know more about the benefits of Loan Against Mutual Funds In India read our blog now.
What is a Loan Against Mutual Funds?
A loan against mutual funds is a financial product provided by companies like Neoble that allows you to borrow money by pledging your mutual fund units or shares as collateral. This type of loan is secured, meaning the lender holds your mutual fund units as security until you repay the loan.
What are the benefits of a Loan Against Mutual Funds?
1. Lower Interest Rates – Since the loan that you get via LAMF in India is secured against your mutual fund units, the interest rates are generally lower compared to unsecured loans like Personal loans.
2. Retain Ownership of Investments – While taking a loan against mutual funds you give a lien to the lender which gives you the right to earn returns on your mutual fund investments while using them as collateral for the loan. This means all the dividends that the company will be providing will be paid to you only and not to the lender.
3. Flexible Loan Amounts – In India the haircut amount on collateral is very large. This makes us obtain only 30% – 50% of our collateral as a loan amount. With LAMF you can get up to 50-80% of the value of the mutual fund units pledged.
4. Quick Processing – Loans against mutual funds is a 100% digital process. Due to this, all your processes are processed quickly, providing timely access to funds.
5. Lack Of Peace Of Mind – Most of the travel loans you get are in the form of Buy Now Pay Later schemes. The BNPL scheme is one of the most difficult types of debt to manage. Going with a travel loan which is in the form of BNPL can easily hamper your peace. It not only makes you vulnerable to poor financial management but also makes you feel less confident.
Combining a Travel Loan with a Loan Against Mutual Funds
Combining a travel loan with a loan against mutual funds can be a strategic financial move. Here’s how:
1. Leverage Lower Interest Rates – By taking a loan against mutual funds, you can get the benefit of lower interest rates compared to traditional travel loans. This can significantly reduce the overall cost of your loan. For example – If you pledge your mutual funds portfolio that is giving a 15% return and you are paying an interest of 12%, after paying the interest also you will be left with an extra 3%.
2. Preserve Liquidity – Pledging your mutual funds for a loan allows you to access funds without liquidating your investments. This way, you can keep your long-term financial goals on track while financing your immediate travel needs.
3. Flexible Repayment Options – Both travel loans and loans against mutual funds offer flexible repayment terms. You can choose a tenure that aligns with your financial situation and goals. This not only ensures manageable EMIs but also makes your dream of financial freedom stay alive.
Steps to Apply for a Travel Loan Against Mutual Funds
1. Assess Your Mutual Funds Portfolio – Evaluate your mutual fund holdings to determine how much you can pledge as collateral. Ensure that the mutual funds you choose are accepted by lenders for such loans.
Want to fetch your mutual funds now? You can directly fetch your Mutual Fund Portfolio.
2. Choose the Right Lender – After looking at your mutual funds portfolio, the second thing to do is compare different lenders to find the best interest rates and terms. You can look for companies like Neoble which offer loans against mutual funds.
3. Apply for the Loan – Submit your loan application along with the necessary documents, including details of your mutual fund units. The lender will assess the value of your mutual funds and approve the loan amount accordingly.
4. Get Funds Disbursed – Once approved, the funds will be disbursed to your account, and you can start planning and booking your trip.
Conclusion
A travel loan combined with a loan against mutual funds can be a smart way to finance your dream vacation without straining your finances. By leveraging your mutual fund investments, you can enjoy lower interest rates and retain your investment’s growth potential. Alternatively, the chances of you dipping into your savings fund to finance your travel will also be reduced which will have a wealth effect on you and can make you less confident.
Want to read more about Loan Against Mutual Funds, read Neoble’s blog on various finance topics now!
Also Read –
Comparing Personal Loans and Loans Against Mutual Funds for Emergency Funding