What Are Travel Now Pay Later Schemes?

Travel now, pay later (TNPL) is a close cousin of the more popular buy now, pay later (BNPL) schemes. This option enables you to plan holidays by taking a loan through apps of travel websites or others having tie-ups with financial institutions and banks. You can use the money for travel expenses, and pay back the loan through equated monthly instalments (EMIs). These are, typically, available on the credit score criteria. TNPL is becoming popular in India as it helps you manage expenditure without an upfront payment, including train or flight tickets, hotels and travel packages, but understand what you are getting into.

Features of TNPL

• TNPL is like any other loan, which has a processing fee and charges an interest rate.

• There are apps that do not charge a processing fee but some apps have unique fee structures for different time periods. The lender tend to charge higher processing fee for a longer tenure loan.

• Usually, the EMI period for such schemes ranges from a few days to 18 months.

• TNPL schemes often have nil or only minimal down payment.

• The interest rate ranges between nil to up to 13-15 per cent for shorter repayment tenures, depending on the lender and your credit score and eligibility.

What is The Cost?

• Suppose you opt for a TNPL plan with a zero interest rate and a non-refundable processing fee of 4 per cent. If the trip costs Rs 50,000, the processing fee will be Rs 2,000, which will be charged from you upfront.

• There are usually charges on late payment, missed payment or non-payment of instalments. For instance, some TNPL loan providers charge a late payment penalty of 3 per cent along with a goods and service tax (GST) of 18 per cent in case of non-payment or partial repayment of the outstanding balance.

• If that happens, the cost of your loan will go up sharply. Therefore, you need to assess your repayment capacity before going for such a scheme.

Should You Go For It?

• The overall cost usually is much higher than the actual cost of the trip. Any missed instalment can further add to the cost.

• A missed payment can also lower your credit score.

• Experts advise treating travel as a short-term goal and saving towards it accordingly. This will earn you an interest, besides inculcating a saving habit.

• If you still want to go for TNPL, ensure you do not fund high-cost trips if it is likely to put a strain on your cash flow later.

• Read the terms and conditions carefully. Sometimes the cost of processing fees replaces the leverage of ‘zero interest’.